IRAQ
RECONSTRUCTION
FUNDING SOURCES
AND USES
Iraq Reconstruction Funding Sources
26
Contracting
41
U.S. Reconstruction Funding Uses
48
Security
50
Infrastructure
71
Governance
88
Economy
102
2
section
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
IRAQ RECONSTRUCTION FUNDING SOURCES
As of June 30, 2009, nearly $140.29 billion has
been made available for the relief and reconstruction of Iraq. These funds have come from
three main sources:39
• Iraqi capital budgets and the Development
Fund for Iraq (DFI)—$71.01 billion
• International pledges of assistance from nonU.S. sources—$17.01 billion
• U.S. appropriations—$52.27 billion
See Figure 2.1 for an overview of these
funding sources.
Iraqi Funding
Each year since the 2003 invasion, the Government of Iraq (GOI) has increased its contribution
to reconstruction efforts, and it now provides
more funding than the United States and all
other international sources combined. Under the
Coalition Provisional Authority (CPA), Iraqi reconstruction funding was supplied directly by the
DFI. Currently, 95% of GOI oil revenues accrue to
the DFI, which is used to fund Iraq’s annual budget, including the reconstruction-oriented capital
budget.40 As of June 30, 2009, Iraqi reconstruction
funding from the CPA-era DFI and its annual
capital budgets totaled more than $71.01 billion.
Iraq’s rate of expenditure continues to lag U.S.
spending.41 Unspent capital budget allocations
contributed to the estimated $21.5 billion cumulative fiscal surplus amassed as of the end of
2008.42 Now Iraq faces a projected budget deficit
of $16 billion in 200943 as lower oil prices reduce
GOI revenues and public-sector wage hikes and
increased security responsibilities drive up GOI
26 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Figure 2.1
Funding Sources
$ Billions, Total $140.29
Total International
Funding $17.01
Bilateral $10.96
Multilateral $6.05
IRRF
$20.86
ISFF
$18.04 Total
Total Iraqi
Funding
$71.01
ESF $4.18
CERP $3.63
Other $5.56
U.S. Funding
$52.27
Note: Data not audited. Numbers affected by rounding.
Sources: Treasury, response to SIGIR data call, 7/2/2009; NEA-I, response to
SIGIR data call, 7/2/2009; U.S. Embassy-Baghdad, responses to SIGIR data
call, 7/6/2009 and 7/16/2009; GRD, response to SIGIR data call, 7/4/2009;
ITAO, Essential Indicators Report, 5/14/2009; OSD, responses to SIGIR data
call, 7/2/2009 and 7/13/2009; SIGIR, Quarterly and Semiannual Reports to
the United States Congress, 3/2004–4/2009.
operating expenses.44 Only 22% of the revised
2009 budget is allocated to capital projects. Expenditures are even lower; $500 million (6%) of
the $8.6 billion in 2009 GOI expenditures to date
have gone to capital projects.45
International Development
Assistance
As of June 30, 2009, international donors have
pledged $17.01 billion—$5.26 billion in grants
and $11.75 billion in loans—for Iraq reconstruction. These donors have committed $9.86 billion,
or 58% of pledged funds.46 For an overview of
bilateral and multilateral development assistance
to Iraq, see Figure 2.2.
IRAQ RECONSTRUCTION FUNDING SOURCES
Figure 2.2
International Grants and Loans, Pledged vs. Committed, by Donor
$ Billions
Bilateral Assistance
Loans
$4
$3
$2
Grants
$1
$0
$0
$1
$2
Loans
Total Commitments
Total Pledges
Japan
EC
Grants
Total Commitments
Total Pledges
UK
Italy
Korea
Canada
Kuwait
Spain
Saudi Arabia
UAE
Iran
All Others
Multilateral Assistance
Loans
$4
$3
$2
Grants
$1
$0
$0
$1
$2
IRFFI
IMF
World Bank
Islamic
Development
Bank
Note: Bilateral commitments exclude IRFFI deposits. The European Commission (EC) remains the largest IRFFI contributor, with deposits totaling $772
million, or 42% of total IRFFI deposits.
Source: NEA-I, response to SIGIR data call, 7/2/2009.
Bilateral Development Assistance
Bilateral development assistance includes grant
and loan commitments and pledges from donor
countries. As of June 30, 2009, $7.15 billion in
bilateral assistance had been committed to Iraq.
The largest international (non-U.S.) donors include
Japan, with $3.60 billion committed through
grants and loans, and the European Commission,
with $0.72 billion committed through grants. The
only change this quarter was a donation by Saudi
Arabia of $3.5 million to the Office of the United
JULY 30, 2009 I REPORT TO CONGRESS I
27
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Nations High Commissioner for Refugees
(UNHCR) for the benefit of Iraqi refugees.47
Multilateral Development Assistance
Multilateral development assistance includes loan
commitments and pledges from the World Bank,
International Monetary Fund (IMF), and the Islamic Development Bank, as well as International
Reconstruction Fund Facility for Iraq (IRFFI)
donor deposits.
The IRFFI was launched in 2004 to help donor
nations channel their resources and coordinate
support for reconstruction and development in
Iraq. The facility comprises both the World Bank
Iraq Trust Fund and the United Nations Development Group Iraq Trust Fund. New IRRFI
projects must start by the end of 2010; project
completions and disbursements are to take place
no later than December 31, 2013.48 As of June 30,
2009, donors had committed $1.84 billion for
Iraq reconstruction through the IRFFI.49
U.S. Funding
The U.S. Congress has appropriated or otherwise
made available $52.27 billion for reconstruction
efforts in Iraq, including the building of physical
infrastructure, the establishment of political and
societal institutions, reconstitution of security
forces, and the purchase of products and services
for the benefit of the people of Iraq.50
As of June 30, 2009, $46.71 billion (89%) of all
U.S. funding for Iraq had been appropriated to
four major funds:51
• Iraq Relief and Reconstruction Fund
(IRRF). At $20.86 billion, the IRRF is the
largest U.S. reconstruction fund, but only
$534 million remains available to be expended
for ongoing projects.52
28 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
• Iraq Security Forces Fund (ISFF). $18.04
billion has been appropriated to the ISFF
to support the infrastructure, equipment,
training, and sustainment needs of the Iraqi
Security Forces (ISF). The ISFF represents 60%
of unobligated U.S. funding and 62% of funds
remaining for expenditure.53
• Economic Support Fund (ESF). $4.18
billion has been appropriated to the ESF.
Administered by the Department of State
(DoS), the ESF supports projects in three
program tracks: Security, Economic, and
Political.
• Commander’s Emergency Response Program (CERP). At $3.63 billion, the CERP is
the smallest of the major reconstruction funds.
The Congress intends CERP to be used by U.S.
military commanders to address urgent relief
and reconstruction needs in their areas of
responsibility.54
As of June 30, 2009, more than $42.59 billion (91%) had been obligated from the four
major funds, and $38.49 billion (82%) had
been expended.55
In addition to these four major funds, $5.56
billion had been appropriated to several smaller
funds.56
For a detailed account of appropriations, obligations, and expenditures, as of June 30, 2009,
see Figure 2.3 and Table 2.1.
Supplemental Appropriations Act, 2009
On June 24, 2009, the President signed P.L.
111-32, the Supplemental Appropriations Act,
2009. Section 306(a) of the act rescinds $1.00
billion from the ISFF (which would have been
unavailable for obligation after September 30,
2009) and appropriates $1.00 billion for the same
purpose, to remain available until September 30,
IRAQ RECONSTRUCTION FUNDING SOURCES
Figure 2.3
Status of Major U.S. Funds
$ Billions
$0
$10
Appropriated
IRRF
Obligated
IRRF
Expended
IRRF
$20
$30
$40
ISFF
ESF
ISFF
ESF
ISFF
ESF
Obligated, Not Expended
$4.10
CERP
$0.21
ESF
$0.74
5%
CERP
CERP
CERP
$0.22
5%
ESF
$0.85
18%
CERP
Not Obligated
$4.12
IRRF
$0.55
13%
$50
IRRF (Expired)
$0.59
14%
21%
60%
63%
ISFF
$2.59
ISFF
$2.47
Note: Data not audited. Numbers affected by rounding.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, responses to SIGIR data call, 7/4/2009 and 7/18/2009; ITAO,
Essential Indicators Report, 5/14/2009; MNC-I, Quarterly Report, 4/7/2009 and 7/4/2009; OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009.
2010. The total amount appropriated to the ISFF
remains unchanged, but the time available for its
obligation has been extended.57
P.L. 111-32 appropriates $2.97 billion to the
ESF, of which $439 million (15%) is allocated for
Iraq reconstruction. Iraq’s allocation is divided
among several programs, including $118 million
for the Democracy and Civil Society program
and $50 million for the Community Action
Program. A total of $239 million of the ESF for
Iraq is not allocated on a program level.58
The Congress also allocated $20 million for
Iraq from the International Narcotics Control
and Law Enforcement fund.59 Title XI of the Act
provides for the transfer of $7 million to SIGIR
and appropriates $2 million for Iraq under the
International Military Education and Training fund.60 A total of $453 million has been
JULY 30, 2009 I REPORT TO CONGRESS I
29
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Table 2.1
U.S. Appropriated Funds
Appropriations by Fiscal Year, FY 2003-FY 2007
$ Millions
P.L. 108-7,
P.L. 108-11
P.L. 108-106,
P.L. 108-287
P.L. 109-13
P.L. 109-102,
P.L. 109-148,
P.L. 109-234
P.L. 109-289,
P.L. 110-28
2003
2004
2005
2006
2007
5,490
3,007
5,542
1,545
1,478
Major Funds
Iraq Relief and Reconstruction Fund (IRRF 2) a
18,439
Iraq Security Forces Fund (ISFF)
Economic Support Fund (ESF) b
50
Commander's Emergency Response Program (CERP) c
Iraq Relief and Reconstruction Fund (IRRF 1)
2,475
Subtotal
2,525
140
718
678
743
18,579
6,208
5,230
7,764
Other Assistance Programs
Iraq Freedom Fund (Other Reconstruction Activities) d
Migration and Refugee Assistance (MRA) e
Natural Resources Risk Remediation Fund (NRRRF)
International Narcotics Control and Law Enforcement (INCLE)
766
37
45
489
20
91
Democracy Fund (DoS/Democracy)
International Disaster Assistance (IDA) e
144
8
Iraq Freedom Fund (TF-BSO)
50
P.L. 480 Title II Food Aid
68
Child Survival and Health Programs Fund (CSH)
90
3
International Disaster and Famine Assistance (IDFA) e
Voluntary Peacekeeping Operations (PKO)
150
250
45
50
Alhurra-Iraq Broadcasting
40
Nonproliferation, Anti-terrorism, Demining and Related Programs (NADR)
7
Overseas Humanitarian, Disaster and Civic Aid (OHDACA)
17
Education and Cultural Exchange Programs (DoS/Exchange)
6
International Affairs Technical Assistance (OTA)
13
3
International Military and Education Training (IMET)
U.S. Marshals Service (Litigation Support Services)
1
Department of Justice (DoJ)
Subtotal
2
1,664
57
3
119
551
200
630
Reconstruction-Related Operating Expenses
Coalition Provisional Authority (CPA) f
833
Project and Contracting Office (PCO) g
USAID Operating Expenses (USAID OE) h
21
24
79
Iraq Freedom Fund (PRT Administrative Costs)
100
U.S. Contributions to International Organizations (IO Contributions)
Subtotal
21
833
24
279
730
24
35
Reconstruction Oversight
Special Inspector General for Iraq Reconstruction (SIGIR)
75
DoD Office of the Inspector General (DoD OIG)
USAID Office of the Inspector General (USAID OIG)
5
4
2
3
1
Defense Contract Audit Agency (DCAA) i
16
DoS Office of the Inspector General (DoS OIG)
Subtotal
Total
a
1
2
4
77
3
30
53
4,214
19,546
6,238
5,658
9,099
$18.439 billion represents the amount appropriated by the Congress for Iraq programs in IRRF 2 under P.L. 108-106, enacted in November 2003. The Congress had initially appropriated
$18.649 billion to IRRF 2, but also earmarked that $210 million be transferred to other accounts for programs in Jordan, Liberia, and Sudan. Of the remaining $18.439 billion, the
Administration transferred out of the IRRF to other accounts roughly $562 million for Iraq-related programs that could be implemented only in other accounts, such as a $352 million
Iraq bilateral debt forgiveness program to the United States that required funding in a Treasury account. The Congress was notified of all transfers out of the IRRF. In addition, Congress
earmarked that $9.95 million of FY 2006 appropriations be transferred into the IRRF from the DoS ESF. Also includes a $50 million rescission as identified in HR 2642.
b $40 million from FY 2003 ESF base account that was not reimbursed; $10 million from P.L .108-11. FY 2007 ESF Emergency Supplemental includes $76 million rescission.
c Funds appropriated to the CERP are for efforts in Iraq and Afghanistan. SIGIR reports DoD’s allocation to CERP for Iraq.
30 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
IRAQ RECONSTRUCTION FUNDING SOURCES
Appropriations, FY 2008-FY 2009
P.L. 110-92,
P.L. 110-116,
P.L. 110-137,
P.L. 110-149
P.L. 110-161
P.L. 110-252
P.L. 111-32
12/21/07
12/26/07
06/30/08
06/24/09
Status of Funds
Total Appropriated
Allocated
Obligated
Expended
Major Funds
IRRF 2
(50)
ISFF
ESF
123
CERP
18,389
18 ,016
18 ,016
17 ,482
1,500
1,500
1,000
18,039
18,039
15,573
12,979
15
527
439
4,177
3,632
3,327
2,584
365
986
3,630
3,630
3,409
3,195
2,475
2,271
2,261
2,249
46,710
45,589
42,587
38,489
IRRF 1
Subtotal
123
1,880
2,962
20
149
269
1,439
Other Assistance
IFF (Other)
MRA
766
766
746
715
520
485
455
372
489
489
489
489
386
346
322
144
75
325
325
315
124
45
247
93
82
35
50
100
34
32
27
16
16
14
NRRRF
INCLE
20
85
DoS/Democracy
IDA
50
IFF (TF-BSO)
P.L. 480 Title II
20
23
94
CSH
IDFA
90
5
50
PKO
50
Alhurra
40
NADR
12
16
5
40
OHDACA
DoS/Exchange
17
5
6
1
0
16
OTA
IMET
16
U.S. Marshals
2
2
3
DoJ
Subtotal
3
2
64
244
530
22
3,255
Data Incomplete
Operating Expenses
CPA
833
PCO
830
USAID OE
21
77
832
832
799
222
IFF (PRT)
100
IO Contributions
Subtotal
21
68
68
145
2,053
Data Incomplete
Oversight
SIGIR
39
DoD OIG
USAID OIG
7
21
26
3
3
4
18
DoS OIG
1
1
8
Subtotal
4
25
51
7
253
191
2,170
3,688
1,468
52,270
DCAA
Total
d
e
f
g
h
i
180
16
13
Data Incomplete
Includes funds appropriated to the Iraq Freedom Fund by P.L. 108-11, Title I, and transferred to reconstruction activities.
HR 2642 appropriated funding for International Disaster and Famine Assistance and Migration and Refugee Assistance is subject to change pending final worldwide allocation of
these two funds.
Excludes $75 million for Special Inspector General for Iraq Reconstruction under P.L. 108-106.
Per conference reports for P.L. 109-234 and P.L. 110-28, reconstruction support funding is provided for Project and Contracting Office activities.
Incomplete pending further investigation into administrative expenses for all fiscal years.
As identified in the P.L. 110-28 conference report. Includes Iraq reconstruction efforts for civilian personnel, temporary/additional duty, and miscellaneous contracts.
JULY 30, 2009 I REPORT TO CONGRESS I
31
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.4
Quarterly Obligation and Expenditure Rates of Major U.S. Funds
% of Available Funds Obligated and Expended
25%
Obligation
Rate
20%
Expenditure
Rate
15%
10%
5%
0%
FY 2004
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009
Note: Numbers affected by rounding. Obligation Rate is the ratio of funds obligated during the quarter to the total funds available (appropriations less
expired funds) as of the start of the quarter. Expenditure Rate is the ratio of funds expended during the quarter to the total funds available as of the
start of the quarter.
Source: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, responses to SIGIR data call, 7/4/2009 and 7/18/2009, ITAO,
Essential Indicators Report, 5/14/2009; MNC-I, Quarterly Reports, 4/7/2009 and 7/4/2009; OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009; SIGIR,
Quarterly and Semiannual Reports to the United States Congress, 3/2004–4/2009.
appropriated to the CERP, but it has not yet been
allocated between Iraq and Afghanistan.61
Quarterly Obligations and Expenditures
This quarter, nearly $760 million was obligated
and more than $853 million was expended
from the four major funds.62 See Table 2.2 for
obligations and expenditures by major U.S.
fund this quarter.
Quarterly obligation rates have assumed a
more regular pattern since late 2006, spiking in
the fourth quarter of each fiscal year. This quarter, however, had the lowest quarterly expenditure
rate of available funds since January 2005.63 See
Figure 2.12 for an overview of obligation rates
versus expenditure rates over time.
32 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Table 2.2
Quarterly Obligations and Expenditures,
by Major U.S. Fund, 4/1/2009–6/30/2009
$ Millions
Fund
Obligated
Expended
ISFF
701
497
ESF
49
186
CERP
20
100
IRRF
-10
70
Total
760
853
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009
and 7/16/2009; GRD, responses to SIGIR data call, 7/4/2009 and
7/18/2009; ITAO, Essential Indicators Report, 5/14/2009; OSD, responses
to SIGIR data call, 7/2/2009 and 7/13/2009.
IRAQ RECONSTRUCTION FUNDING SOURCES
IRRF
Iraq Relief and Reconstruction Fund
The IRRF is the largest source of U.S. reconstruction funding, comprising $20.86 billion
made available through two appropriations:
IRRF 1 ($2.48 billion) and IRRF 2 ($18.39
billion).64 As of June 30, 2009, $20.28 billion
(97%) of the IRRF had been obligated, and
$19.73 billion (95%) had been expended.65 About
$534 million remains available for expenditure
on open projects.66
The largest IRRF 2 sector allocations were
made for Security and Law Enforcement ($4.94
billion) and the Electric Sector ($4.08 billion).
This quarter, the largest expenditures occurred
in the Electric Sector, totaling $22 million between April 1 and June 30, 2009.67 For the status
of IRRF 2 allocations, obligations, and expenditures by sector, see Table 2.3.
Table 2.3
Status of IRRF by Appropriation and Sector
Status of Funds ($ Millions)
Quarterly Change
Appropriation
Sector
Allocated
Obligated
Expended
IRRF 1
Subtotal
2,271.3
2,260.8
2,248.9
-
IRRF 2
Obligated
Expended
-
Security & Law Enforcement
4,936.5
4,936.5
4,892.4
-0.8 (0%)
1.8 (0%)
Electric Sector
4,075.8
4,075.8
4,009.8
0.9 (0%)
22.4 (1%)
Justice, Public Safety Infrastructure, & Civil
Society
2,309.4
2,309.4
2,180.4
-0.2 (0%)
11.8 (1%)
Water Resources & Sanitation
1,965.5
1,965.5
1,891.1
-8.0 (0%)
20.4 (1%)
Oil Infrastructure
1,604.5
1,604.5
1,591.6
-0.2 (0%)
0.2 (0%)
Health Care
795.9
795.9
765.9
-0.1 (0%)
4.0 (1%)
Private Sector Development
860.0
860.0
826.1
-
0.1 (0%)
Education, Refugees, Human Rights,
Democracy, & Governance
519.6
519.6
417.0
-0.6 (0%)
5.1 (1%)
Transportation & Telecommunications Projects
448.1
448.1
435.0
-0.9 (0%)
1.6 (0%)
Roads, Bridges, & Construction
281.4
281.4
262.5
-0.5 (0%)
2.4 (1%)
Administrative Expenses
219.3
219.3
210.3
-
-
18,016.0
18,016.0
17,482.2
-10.3 (0%)
69.6 (0%)
20,287.3
20,276.8
19,731.0
-10.3 (0%)
69.6 (0%)
Subtotal
Total
Note: Data not audited. Numbers affected by rounding.
Sources: U.S. Embassy-Baghdad, response to SIGIR data call, 7/6/2009; SIGIR, Quarterly Report to the United States Congress, 4/2009.
JULY 30, 2009 I REPORT TO CONGRESS I
33
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
ISFF
Iraq Security Forces Fund
Administered by the Department of Defense
(DoD) through the Multi-National Security
Transition Command-Iraq (MNSTC-I), the
$18.04 billion appropriated to the ISFF supports
Iraq’s Ministry of Defense (MOD) and Ministry
of Interior (MOI) in developing the ISF.
As of June 30, 2009, $15.57 billion (86%) of the
ISFF had been obligated, and $12.98 billion (72%)
had been expended.68 For the status of these
funds, see Figure 2.5.
Figure 2.5
ISFF Status of Funds
$ Billions
Change Over
Quarter
Year
Appropriated $18.04 6%
6%
$20
$15
Obligated $15.57
5%
23%
Expended $12.98
4%
31%
$10
$5
Q4
Q1
Q2
Q3
FY 2009
FY 2008
Note: Data not audited. Numbers affected by rounding.
ISFF Quarterly Obligations and Expenditures
by Sub-Activity Group
Sources: OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009; SIGIR, Quarterly
and Semiannual Reports to the United States Congress, 7/31/2008−4/30/2009.
Of the total $18.04 billion appropriated to the
ISFF, $16.96 billion (94%) has been allocated to
four major sub-activity groups:69
• Equipment—equipment procurement, including weapons, vehicles, and communications
• Sustainment—maintenance, equipment, and
logistics support for existing investments
• Training—ministerial capacity development,
unit training, and advise and assist
• Infrastructure—training facilities, military
bases, and police stations
Table 2.4
Status of ISFF by Ministry and Sub-Activity Group
Status of Funds ($ Millions)
Ministry
Sub-activity Group
MOD
MOI
Obligated
Expended
Obligated
Expended
Equipment
4,664.8
4,066.6
3,244.9
133.5 (3%)
79.5 (3%)
Infrastructure
3,256.5
3,023.0
2,611.0
99.6 (3%)
99.5 (4%)
Sustainment
1,951.8
1,781.1
1,601.5
28.7 (2%)
67.9 (4%)
Training
540.8
333.5
284.9
-0.1 (0%)
28.1 (11%)
Subtotal
10,413.9
9,204.3
7,742.3
261.7 (3%)
275.0 (4%)
Training
2,585.9
2,151.5
1,891.0
238.8 (12%)
13.6 (1%)
Equipment
1,864.6
1,491.6
1,154.9
74.9 (5%)
93.1 (9%)
Infrastructure
1,441.8
1,367.1
1,020.4
74.9 (6%)
46.0 (5%)
650.5
532.8
504.4
0.0 (0%)
7.0 (1%)
6,542.9
5,543.0
4,570.6
388.5 (8%)
159.7 (4%)
Sustainment
Subtotal
Other
Quarterly Change
Allocated
Related Activities
Total
1,082.5
825.9
665.8
50.8 (7%)
62.4 (10%)
18,039.3
15,573.2
12,978.7
700.9 (5%)
497.1 (4%)
Note: Data not audited. Numbers affected by rounding.
Sources: OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009; SIGIR, Quarterly Report to the United States Congress, 4/2009.
34 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
IRAQ RECONSTRUCTION FUNDING SOURCES
The remainder of the ISFF is allocated to
smaller sub-activity groups. Collectively termed
“Related Activities,” these smaller sub-activity
groups include the ISFF Quick Response Fund;
disarmament, demobilization, and reintegration;
detainee operations; and rule-of-law complexes.70
Of the $701 million in new ISFF obligations
this quarter, programs to support the MOD
accounted for 37%, and programs to develop the
MOI accounted for 55%. Of the $497 million in
new expenditures this quarter, MOD programs
accounted for 55%, and MOI programs accounted for 32%.71 For the status of the ISFF by
ministry and sub-activity group, see Table 2.4.
Obligation and expenditure figures do not
include the FY 2009 ISFF bridge funding
of $1.00 billion, which was rescinded and reappropriated by P.L. 111-32. The Congress made
these funds available until September 30, 2010.72
Allocation Trends
As shown in Figure 2.6, priorities for the ISFF
have shifted considerably, with a decreased emphasis on Infrastructure and an increased emphasis
on Training. Allocations to Infrastructure dropped
from a high of 41% of the FY 2006 appropriation
to 14% of FY 2008 appropriation.73 No money has
been allocated for Infrastructure in FY 2009/FY
2010, in line with the congressional prohibition
against new ISFF obligations for Infrastructure in
the latest appropriation.74 Allocations to Training increased from a low of 8% of the FY 2006
appropriation to a high of 43% of the FY 2009/
FY 2010 appropriation. Equipment procurement
was consistently well funded from 2005 through
2008. Although Equipment accounts for nearly
$386 million (39%) of the FY 2009/FY 2010 spend
plan, allocations are far less than the $1.16 billion
initially requested by DoD in FY 2009.75
Figure 2.6
ISFF Allocations by Fiscal Year of Appropriation
% of Total Allocations
100%
80%
60%
40%
20%
0%
FY 2005
FY 2006
FY 2007
FY 2008
FY 2009/FY 2010
Infrastructure
Training
Sustainment
Related Activities
Equipment
Note: Data not audited.
Source: OSD, response to SIGIR data call, 7/2/2009.
JULY 30, 2009 I REPORT TO CONGRESS I
35
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
ESF
Economic Support Fund
Since 2003, the Congress has appropriated
$4.18 billion to the ESF to improve infrastructure
and community security, promote democracy
and civil society, and support capacity building
and economic development.76
As of June 30, 2009, $3.33 billion (80%) had
been obligated, and $2.58 billion (62%) had been
expended.77 For the status of these funds, see
Figure 2.7.
Figure 2.7
ESF Status of Funds
$ Billions
$4
$3
The nearly $4.18 billion appropriated to the ESF
is allocated to programs in three tracks:
• Security—programs focused on reducing violence, improving infrastructure security, and
strengthening the link between the government and the community
• Political—activities designed to increase
the capacity of national and provincial
governments
• Economic—programs aimed at increasing the
GOI’s operations and maintenance capabilities
and stimulating private-sector growth
The largest programs are the Provincial
Reconstruction Team/Provincial Reconstruction
Development Council (PRT/PRDC) projects and
the Community Stabilization Program, both of
which are in the Security Track.78
The ESF had $49 million in new obligations
this quarter, of which the PRT Quick Response
Fund accounted for the largest portion at more
than $25 million (51%). Quarterly expenditures
were more dispersed; of the nearly $187 million
in new expenditures this quarter, the Community Stabilization Program accounted for $43 million (23%), and PRT/PRDC projects accounted
36 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Obligated $3.33
2%
35%
Expended $2.58
8%
108%
$2
$1
ESF Quarterly Obligations and
Expenditures by Program
Change Over
Quarter
Year
Appropriated $4.18 12%
12%
$5
Q4
Q1
FY 2008
Q2
Q3
FY 2009
Note: Data not audited. Numbers affected by rounding.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009;
GRD, response to SIGIR data call, 7/4/2009; ITAO, Essential Indicators Report, 5/14/2009;
SIGIR, Quarterly and Semiannual Reports to the United States Congress, 7/2008–4/2009.
for $42 million (23%).79 For the status of ESF
by track and program, see Table 2.5.
ESF Historical Appropriations
and Expenditures by Agency
Iraq receives ESF funding through standard U.S.
appropriations for foreign operations in addition
to the emergency wartime supplemental appropriations.80 The ESF was established to provide
assistance to countries that would not warrant
traditional development assistance.81 Historically, it has been used to support economic and
political stability in countries where the United
States has a national security or other strategic
interest. Between 1976 and 2001, ESF allocations
to Israel and Egypt accounted for more than half
of the total ESF.82
The FY 2010 congressional budget justification for foreign operations requests $6.50 billion
for the ESF (not counting supplemental funds
that may be requested). Of that amount,
IRAQ RECONSTRUCTION FUNDING SOURCES
Table 2.5
Status of ESF by Track and Program
Status of Funds ($ Millions)
Quarterly Change
Track
Program
Allocated
Obligated
Expended
Obligated
Expended
Security
PRT/PRDC Projects
700.0
468.7
323.7
16.6 (4%)
42.1 (15%)
Community Stabilization Program
646.3
646.3
596.8
-0.2 (0%)
42.8 (8%)
Local Governance Program
355.5
355.5
257.9
-
2.7 (1%)
Community Action Program
265.0
265.0
160.8
-
5.5 (4%)
Infrastructure Security Protection
217.0
181.1
176.0
1.3 (1%)
10.9 (7%)
PRT Quick Response Fund
204.0
195.4
107.1
25.4 (13%)
13.0 (14%)
Subtotal
Political
2,387.7
2,111.9
1,622.3
43.0 (2%)
117.0 (8%)
National Capacity Development
264.3
264.3
190.5
-
21.6 (13%)
Democracy and Civil Society
188.9
185.2
144.5
-2.1 (-1%)
5.3 (4%)
-
Economic Governance II, Policy and Regulatory Reforms
85.0
85.0
85.0
-
Iraqi Refugees (Jordan)
58.0
58.0
36.0
-
-
Ministerial Capacity Development
38.0
37.1
27.8
-0.1 (0%)
0.3 (1%)
Regime Crimes Liaison Office
Economic
33.0
30.1
28.4
-0.6 (-2%)
0.3 (1%)
Subtotal
667.2
659.7
512.1
-2.8 (0%)
27.4 (6%)
O&M Sustainment
294.2
273.4
271.5
10.8 (4%)
21.7 (9%)
Inma Agribusiness Development
92.5
92.5
61.9
-
8.9 (17%)
Provincial Economic Growth
60.8
60.8
28.8
-
8.2 (40%)
Targeted Development Program
57.4
57.4
18.4
-
4.9 (37%)
-1.8 (-4%)
Plant-Level Capacity Development & Technical Training
48.7
47.6
46.5
-1.6 (-3%)
Izdihar
23.8
23.8
22.4
-
-
577.4
555.6
449.5
9.2 (2%)
42.0 (10%)
3,632.3
3,327.2
2,584.0
49.5 (1%)
186.5 (8%)
Subtotal
Total
Note: Data not audited. Numbers affected by rounding.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, response to SIGIR data call, 7/4/2009; ITAO, Essential Indicators Report, 5/14/2009; SIGIR,
Quarterly Report to the United States Congress, 4/2009.
$416 million (6%) is requested for Iraq to support capacity building, assist reintegration
of refugees and internally displaced persons
(IDPs), fund anticorruption programs, and promote broad-based economic growth.83
Under policy guidance from DoS, USAID
and the Gulf Region Division (GRD) of the
U.S. Army Corps of Engineers implement most
ESF programs in Iraq. These two executing
agencies have received more than 90% of total
ESF allocations over the course of the reconstruction.84 For a comparison of ESF allocations, obligations, and expenditures, by agency,
see Figure 2.8.
JULY 30, 2009 I REPORT TO CONGRESS I
37
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.8
ESF Allocations, Obligations, and Expenditures, by Agency
$ Billions
Allocated
$3.63
Obligated
$3.33
Other Agency
$0.36
Expended
$2.58
Other Agency
$0.34
USAID
$2.02
10%
USAID
$1.52
10%
60%
35%
GRD
$1.26
USAID
$2.01
10%
56%
Other Agency
$0.25
59%
32%
29%
GRD
$0.97
GRD
$0.82
Note: Data not audited. Numbers affected by rounding.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, responses to SIGIR data call, 7/4/2009 and 7/18/2009; ITAO, Essential Indicators Report, 5/14/2009.
CERP
Commander’s Emergency
Response Program
Since 2004, the Congress has appropriated
$3.63 billion to the CERP to enable MNC-I
commanders to provide targeted local relief and
reconstruction throughout Iraq.85
As of June 30, 2009, $3.41 billion (94%) had
been obligated, and $3.19 billion (88%) had been
expended.86 For the status of these funds, see
Figure 2.9.
Figure 2.9
CERP Status of Funds
$ Billions
Change Over
Quarter
Year
Appropriated $3.63 1%
4%
Obligated $3.41 1%
18%
Expended $3.19 3%
33%
$4.0
$3.5
$3.0
$2.5
$2.0
Q4
FY 2008
CERP Quarterly Obligations and Expenditures
DoD obligates the CERP to 20 project categories,
among which security-related project categories have received the majority of obligations in
recent years.87
Almost all new obligations and expenditures this quarter were in the Water and
Sanitation sector, which accounted for 97% of
new obligations and 97% of new expenditures.
38 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Q1
Q2
Q3
FY 2009
Note: Data not audited. Numbers affected by rounding.
Sources: OSD, response to SIGIR data call, 7/13/2009; SIGIR, Quarterly and
Semiannual Reports to the United States Congress, 7/2008–4/2009.
Water and Sanitation now accounts for 21%
of all CERP obligations.88
Protective Measures is the second largest
category overall, accounting for more than
$401 million (12%) of total obligations.89 This
IRAQ RECONSTRUCTION FUNDING SOURCES
Table 2.6
Status of CERP by Sector
Status of Funds ($ Millions)
Sector
Allocated
Water & Sanitation
601.4
Obligated
Quarterly Change
Expended
Obligated
Expended
609.1
538.1
443.5 (268%)
396.9 (281%)
Protective Measures
404.5
401.3
298.2
13.3 (3%)
22.5 (8%)
Electricity
326.0
329.9
265.4
6.7 (2%)
3.1 (1%)
Transportation
313.8
317.4
268.3
0.8 (0%)
7.1 (3%)
Education
298.2
300.7
241.1
13.2 (5%)
8.8 (4%)
Civic Cleanup Activities
158.7
158.2
125.0
-0.4 (0%)
-7.9 (-6%)
Other Humanitarian and Reconstruction Projects
125.7
125.8
91.2
-3.2 (-3%)
-5.8 (-6%)
-0.1 (0%)
Health Care
99.6
99.3
84.6
0.9 (1%)
Law & Governance
99.6
98.9
88.7
2.3 (2%)
1.0 (1%)
Agriculture
92.0
91.1
65.0
2.1 (2%)
-1.3 (-2%)
Civic Infrastructure Repair
83.7
82.9
70.8
-9.1 (-10%)
-1.8 (-3%)
Economic, Financial, and Management Improvements
82.6
81.7
64.9
-1.6 (-2%)
-2.6 (-4%)
Condolence Payments
39.0
38.4
34.5
-9.0 (-19%)
-8.5 (-20%)
Battle Damage
37.7
37.4
30.8
-1.2 (-3%)
-1.8 (-6%)
Telecommunications
27.5
27.9
25.3
-0.7 (-2%)
2.5 (11%)
Civic Support Vehicles
19.9
19.8
16.7
-
-0.8 (-5%)
Food Production & Distribution
12.7
12.6
9.6
-0.5 (-4%)
-0.2 (-2%)
Detainee Release Payments
Subtotal
Unaccounted for CERP Allocations
Total
0.9
0.9
0.5
-0.1 (-6%)
-0.1 (-9%)
2,823.5
2,833.3
2,318.8
457.1 (19%)
411.1 (22%)
806.3
576.2
876.2
-437.5 (-43%)
-311.0 (-26%)
3,629.8
3,409.5
3,195.0
19.5 (1%)
100.2 (3%)
Note: OSD does not report allocation, obligation, and expenditure data for project categories on a quarterly basis for all fiscal year appropriations. The “Unaccounted for CERP
Allocations” row is the difference between the top-line allocation, obligation, and expenditure data provided by OSD and the categorical data available from IRMS.
Sources: MNC-I, Quarterly Report, 4/7/2009 and 7/4/2009; OSD, response to SIGIR data call, 7/13/2009; SIGIR, Quarterly Report to the United States Congress, 4/2009.
category includes construction and repair of
fencing, lights, barriers, guard towers, and other
measures to enhance the durability and survivability of critical infrastructure sites.90 For the
status of CERP projects by sector, see Table 2.6.
Much of the CERP has been expended slowly
during this fiscal year because MNF-I focused
during the first two quarters on executing projects through the Iraq-Commander’s Emergency
Response Program (I-CERP), the GOI-funded
analog of CERP. As of mid-June, the I-CERP
was nearly 90% obligated.91 The GOI has elected
not to continue funding the program because
of budget constraints caused by reduced oil
revenues.92 Consequently, the Multi-National
Force-Iraq (MNF-I) expects to execute the entire
$500 million available in the CERP for FY 2009.93
MNF-I also expects to execute an additional
$500 million in FY 2010, focusing on Mosul,
Diyala, Tameem, Baghdad, and Basrah.94
As in past years, if the entire CERP allocation is not used, funding will be returned to the
Army Operations and Maintenance account,
where it can be obligated for other purposes before expiration. MNF-I returned $243 million of
the CERP funds appropriated in FY 2008, which
were then obligated for other DoD priorities
before the end of the fiscal year.95
CERP Reporting Practices
The Congress requires SIGIR to submit a quarterly report detailing all obligations, expenditures,
JULY 30, 2009 I REPORT TO CONGRESS I
39
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.10
CERP Reporting Practices
Days Since End of Quarter
End of Quarter
13 15
"Best-Case Scenario" for
manual DoD Quarterly
Report to Congress
30
45
Deadline for DoD
Quarterly Report to Congress
SIGIR's Receipt of Top-line Data for
all CERP Appropriations from DoD
60+
IRMS-based DoD Quarterly
Report Submission to Congress
(FY 2006–2008)
92 days
SIGIR's Receipt from DoD of Category
Data for FY 2009 Appropriation
Sources: DoD OIG, response to SIGIR data call, 1/12/2009; OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009; P.L. 109-163, National Defense
Authorization Act for Fiscal Year 2006, 1/6/2006, Section 1202(b); P.L. 110-181, National Defense Authorization Act for Fiscal Year 2008, 1/28/2008,
Section 1205(b).
and revenues associated with Iraq reconstruction
and rehabilitation, including a project-by-project
and program-by-program accounting of the
costs incurred as of the end of the quarter, within
30 days of the end of the quarter.96 In previous
Quarterly Reports, SIGIR has pointed out DoD’s
difficulty in providing timely and complete information on CERP obligations and expenditures
and on completed and ongoing projects.
The CERP authorizing legislation requires
DoD to submit quarterly reports to the Congress
within 15 days of the end of each quarter. The
Congress further stipulates that these reports
contain the source, allocation, and use of funds
by CERP project category, and that they demonstrate how projects valued at more than $500,000
support CERP objectives.97
As the executive agent for the CERP, the
Secretary of the Army is required to forward
the quarterly CERP reports to the chairmen
and ranking members of the four congressional
defense committees as well as to the DoD Comptroller. Until mid-2008, CERP project details
were available only through the Iraq Reconstruction Management System (IRMS), a Web-based
system maintained by the Multi-National
Corps-Iraq (MNC-I). However, the system was
not compatible with the Army accounting system
and proved an unreliable source for project-level
details; delays of 60 days or more were common.98
To improve accuracy, the Army transitioned
to manual reporting for CERP project details
40 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
in FY 2009. Data now is reported from the field
to U.S. Army Central and passed to the Army
Budget Office, where staff members review
every project line to ensure compliance with
the intent of the CERP as well as the accuracy
of category reporting. Project details are then
provided to the DoD Comptroller and elements
of the Joint Staff and CENTCOM for concurrent
review. When approved, the package is released
to the Congress. The “best-case scenario” for
accurate reporting using the manual system is
30 to 45 days.99
For a timeline of CERP reporting practices,
see Figure 2.10.
Unlike the other major funds, CERP obligation and expenditure data for prior-year appropriations is not reported for project categories on
a quarterly basis; the DoD Comptroller reports
obligation and expenditure data by project category only for the current fiscal year appropriation. Historical obligation and expenditure data
is only available from IRMS—the reporting system identified by the DoD Office of the Inspector
General and SIGIR as unreliable.100 For its mandated reporting, SIGIR recently agreed to accept
CERP obligation and expenditure data by project
category a full 90 days past the end of the fiscal
quarter to accommodate the OSD’s reporting
practices. The FY 2009 CERP data by category
for the quarter ending March 31, 2009, was not
received until July 2, 2009, and it lacked expenditure data for prior-year appropriations.101 ◆
CONTRACTING
CONTRACTING
CONTRACTING IN IRAQ WAS
DONE WILLY-NILLY.102
—SECRETARY OF DEFENSE
ROBERT GATES,
JANUARY 2009
Contractors continue to play a substantial role
in supporting U.S. military and diplomatic
operations, as well as reconstruction programs
in Iraq. The services they provide range from
brick-and-mortar construction projects (power
generation, medical, and security facilities) to
non-construction activities (building the GOI
capacity) to activities supporting uniformed
military and diplomatic personnel (life support
and personal security). Although contractor
support of military and diplomatic efforts can
be seen as separate from contract work related to
reconstruction, the lines are often blurred.
Early U.S. efforts in Iraq frequently engaged
multiple agencies with overlapping jurisdictions—and without adequate resources—to oversee the contracting and resulting project-management processes.103 But the contracting and
procurement process generally improved over the
course of the reconstruction effort. Agencies are
addressing the lessons learned—such as management of private security contractors (PSCs)—
which has improved operational processes.
• Air Force Center for Engineering and the
Environment (AFCEE)
• U.S. Agency for International Development
(USAID)
• Department of State (DoS)
JCC-I/A reports to the Multi-National ForceIraq (MNF-I), providing centralized management and operational contracting support.
The JCC-I/A Commander has the authority to
approve statements of work to ensure that appropriate terms and conditions are included in contracts for the delivery of supplies and services.105
GRD plans to reorganize its operations in Iraq,
moving from a division with three districts to a
single district by March 2010. MNF-I is developing the framework around which U.S. personnel
will reduce their footprint in Iraq between now
and August 2010. This drawdown of military
forces and DoD civilians will likely result in
increased reliance on contractor personnel.106
USAID reports that, as the military draw
down, it will rely more on GOI assets and subcontractors to continue key support programs at
the national and provincial levels.107
U.S. Contracting Organizations
Six U.S. government organizations are primarily
responsible for implementing Iraq reconstruction efforts, including managing the contractors
who carry them out:104
• Joint Contracting Command-Iraq/Afghanistan
(JCC-I/A)
• U.S. Army Corps of Engineers, Gulf Region
Division (GRD)
• Multi-National Corps-Iraq (MNC-I)
Contractor Tracking System
The Joint Contingency Contracting System
(JCCS) has been supporting U.S. expeditionary
contingency contracting for two years, facilitating several functions critical to efficient and
effective oversight, including:108
• providing a location for storing all reconstruction contracts in Iraq and Afghanistan
JULY 30, 2009 I REPORT TO CONGRESS I
41
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
• tracking vendor past performance
• posting all Iraq and Afghanistan reconstruction solicitations
• providing a location for vendors to submit
proposals
• tracking all historical reconstruction contract
data
• allowing oversight of in-theater contracts to
monitor cost, schedule, and performance, as
well as vendor activities
More than 33,400 vendors are now tracked
in the JCCS, and over 77,850 actions have been
awarded to local Iraqi and Afghan vendors who
have registered in the system.109 Recent system
milestones include:110
• 22 Regional Contract Commands throughout
Iraq and Afghanistan have been automated
and linked to a centralized database for electronic capture and reporting on reconstruction contracts.
• Transition of work for rotating Commanders
and Contracting Officers has been improved.
• Headlines and notifications on the main website page provide a centralized communication
area throughout the JCC-I/A.
• All contracting information on the Task
Force to Improve Business and Stability
Operation had been integrated into the JCCS
as of January 1, 2009.
USAID contract data does not account for all
obligations.
For a summary of the major contractors that
have executed projects funded through the IRRF 2,
ISFF, and ESF, as of June 30, 2009, see Table 2.7.
U.S. Initiative for Businesses
Owned by Women
At least one million women, are heads of
households in Iraq and Afghanistan.112 As
part of its effort to increase access to contracting opportunities for Iraqi-owned businesses, especially those owned by traditionally
underserved groups,113 JCC-I/A launched the
Women Owned Businesses (WOB) program
to help women support themselves and their
families.114
In Iraq, the WOB program is a part of the
woman-led Business Development and Outreach Program (BDOP), which provides business education, entrepreneurial skills training,
and economic opportunities for Iraqi women.
Reconstruction Contract
Overview
Since 2003, U.S. agencies have awarded more
than $42 billion for reconstruction contracts in
Iraq, or more than 91% of all U.S. appropriations
for reconstruction,111 but Corps of Engineers
Financial Management System (CEFMS) and
NCD/Tatweer Capacity Development Training in Baghdad. (MNF-I photo)
42 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
CONTRACTING
Table 2.7
Major IRRF 2, ISFF, and ESF Contractors
$ Millions
Fund Name
Contractor
IRRF 2
FluorAMEC, LLC
944
942
Parsons Global Services, Inc.
663
641
Kellogg, Brown & Root Services, Inc.
630
620
Parsons Iraq Joint Venture
628
625
Washington Group International, Inc. (Power)
490
488
ISFF
ESF
Obligated
Expended
Environmental Chemical Corporation
312
310
Anham Joint Venture
259
259
Uruk-Baghdad Joint Venture
169
169
Washington International/ Black & Veatch
157
153
AECOM Government Services, Inc.
859
710
Environmental Chemical Corporation
709
691
AMECO
497
386
Navistar Defense, LLC
437
283
ALMCO, Limited
313
250
Innovative Technical Solutions, Inc.
284
273
Tetra Tech EC, Inc.
278
274
Toltest, Inc.
267
261
Wamar International, Inc.
71
68
Parsons Brinckerhoff, Inc.
62
62
Stanley Baker Hill, LLC
26
25
Eastern Deffaf al-Nahraen
24
9
Iraq Power Alliance Joint Venture
22
22
Altayf al-Abiad Company, AAAE
21
10
Sakar al-Fahal Company
17
17
Al-Qaswaa United Co. for General Contracts
14
14
Zana Group Company
13
13
Al-Kahlaa Group Company
13
10
Note: Numbers affected by rounding. This list is produced by compiling contract-level obligation data provided by different agencies.
Source: CEFMS, 7/4/2009.
JULY 30, 2009 I REPORT TO CONGRESS I
43
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
The BDOP employs 12 consultants—Arabicspeaking business owners who understand the
local culture.115
JCC-I/A reports that from FY 2006 to FY
2009, women-owned businesses in Iraq have
been awarded contracts valued at more than
$450 million, an increase of more than 300%
since 2005. As of June 2009, more than 2,000
women-owned businesses had registered to do
business with the JCC-I/A.116
Update on Contractor Personnel
Currently, more than 167,000 contractor employees (72% non-U.S. nationals) are working in
Iraq to support the operations and projects of the
U.S. military, DoS, and other U.S. government
agencies. Prime contractors and subcontractors
are required to register to gain access to Iraq.
However, the U.S. government cannot confirm
whether the manual census of those contractors already operating in the theater includes all
subcontractor entities.117 For an estimated total
number of contractors by agency, see Table 2.8.
The contractor force provides a broad range of
skills and capabilities. For a breakdown of DoD
contractors by national origin and type of service
they provide as of May 30, 2009, see Figure 2.11.
Companies providing services for the U.S. government in Iraq enter into these contracts with
certain expectations about the risks they may face
in a hostile operating environment. Since 2003,
more than 1,469 U.S. contractors have died in
Iraq (See Figure 2.12).118
Table 2.8
Contractor Support for Iraq
Agency
U.S. Citizens
Third-country
Nationals
Iraqi
Nationals
Total
Contractors
DoS
4,079
-
-
4,079
DoD
34,846
56,191
34,126
125,163
8,948
26,973
5,929
41,850
47,873
83,164
40,055
171,092
Others
Total
Note: Information on third-country and Iraqi nationals contracting under DoS was not available.
Sources: Assistant Deputy Under Secretary of Defense for Program Support, “Contract Support in
Contingency Operations,” 5/2009, p. 4; OSD, response to SIGIR data call, 7/14/2009; U.S. Embassy-Baghdad,
response to SIGIR data call, 7/6/2009.
Figure 2.11
DoD Contractors in Iraq
125,163 Total Contractors
National Origin
Type of Service Provided
Other
16,333
28%
27%
U.S. Citizens
34,846
Translator/
Interpreter
8%
Iraqi
Nationals
Security
34,126
12,730
45%
13%
9,557
Third-country
Nationals
56,191
10%
9%
Construction
61%
10,749
Base Support
75,794
Note: Numbers affected by rounding. These numbers reflect DoD contractors only. Totals for reconstruction
contractors working in other agencies are not available.
Sources: Assistant Deputy Under Secretary of Defense for Program Support, “Contractor Support of U.S.
Operations in USCENTCOM AOR, Iraq, and Afghanistan,” 5/2009; OSD, response to SIGIR data call, 7/14/2009.
Figure 2.12
Contractor Deaths in Iraq, by Quarter, 1/1/2004–6/30/2009
150
120
90
60
30
No data available
0
2004
2005
2006
2007
2008
Sources: DoL, response to SIGIR data call, 7/1/2009; SIGIR, Quarterly Reports to the United States Congress,
7/2004–4/2009.
44 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
2009
CONTRACTING
Challenges to Effective
Contract Oversight in Overseas
Contingency Operations
The success of reconstruction programs in overseas contingency operations (OCOs) depends
in large part on the U.S. government’s ability
to efficiently and rapidly deploy the necessary
services, materials, and support systems. This requires government contracting and procurement
processes that are well structured and customized for contingency situations.
The root cause of the lack of unity of effort
among U.S. agencies participating in the Iraq reconstruction effort is the absence of an integrated
management structure for effectively and efficiently implementing reconstruction programs
in unstable nation-states.
Since 2004, SIGIR, in partnership with other
oversight agencies, has documented many examples of how the failure to effectively integrate
agency efforts has hindered the U.S. mission in
Iraq. For example, initial U.S. reconstruction efforts in Iraq were plagued by:119
• missed tactical and strategic opportunities
• weak program oversight
• inadequate contract management
• insufficient personnel, financial, and contracting resources
• poor financial accountability
• missed tactical and strategic opportunities
• lack of a unified operating system to ensure
command and control
A 2009 CRS report addressing the need for
reforming the way the U.S. government conducts
reconstruction and stabilization (R&S) operations notes five points commonly highlighted in
recent studies of this issue:120
• The ad hoc system needs to be replaced with
a permanent mechanism for developing
contingency plans and procedures for joint
civil-military operations led by civilians.
• Mechanisms must be developed to rapidly
deploy U.S. civilian government employees
and contractors in R&S situations.
• Preventive action should be consistent.
• The U.S. government needs to “enhance multinational capabilities” to carry out R&S security
tasks and coordinate international aid.
• Flexible funding arrangements for R&S efforts
should be developed.
Strengthening Contractor
Oversight
In 2008, the Congress established the Commission on Wartime Contracting in Iraq and
Afghanistan. The eight-member commission is
a bipartisan, independent entity charged with
evaluating and reporting on America’s wartime
contracting for logistics, reconstruction, and security. In its interim report released in June 2009,
the commission reinforced a conclusion reported
in numerous SIGIR audits: “There is an acute
shortage of qualified DoD personnel to monitor
reconstruction contracts.”121
As part of its efforts to strengthen contracting
oversight, the Secretary of Defense announced
in May 2009 that DoD has adopted a goal of
replacing 20,000 contractors (who were overseeing contracts) with civil servants over the next
5 years. DoD’s short-term goal for 2010 is to
replace 4,100 contractors with civil servants.122
JULY 30, 2009 I REPORT TO CONGRESS I
45
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Comprehensive Database
for Managing Contractors
Section 861 of the National Defense Authorization Act for FY 2008 required the Secretary
of Defense, the Secretary of State, and the
USAID Administrator to enter into a memorandum of understanding (MOU) regarding
the following issues related to contracting in
Iraq and Afghanistan:123
• identification of the major categories of contracts
• identification of the roles and responsibilities
of each agency
• responsibility for establishing procedures
for, and the coordination of, movement of
contractors
• identification of common databases that will
serve as repositories for information on contracts in Iraq
A July 2008 MOU between these agencies
designated the Synchronized Pre-Deployment
and Operational Tracker (SPOT) database as the
system for tracking the information required by
this agreement. This Web-based tool provides
information on contractor personnel serving in
theater. A SPOT-generated letter of authorization is now required for contractors receiving
government support, which has prompted a
substantial increase in registered contractor personnel. SPOT now has more than 159,000 active
contractor records.124
46 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
U.S. Embassy-Baghdad reports that it has
limited ability to enforce SPOT use because
DoD has the lead on SPOT maintenance, and
the majority of contractors listed in SPOT are
DoD contractors. To track its own contractors,
DoS requires Iraqi and Afghan contractors to
present a SPOT-generated letter of authorization before issuing a Common Access Card for
use during deployment. Notwithstanding these
and other efforts to improve accountability,
agencies continue to use different systems for
tracking contractor personnel. Uniform use of
SPOT by DoD, USAID, and DoS contractors is
not yet the norm.125
Strengthening the Contract
Monitoring Process
SIGIR’s Hard Lessons: The Iraq Reconstruction Experience, published in February 2009,
reviewed the U.S. effort to help rebuild Iraq and
summarized the lessons that could be derived
from this experience, including lessons that
could be applied to government contracting. In
May, General David Petraeus, Commander
of the United States Central Command
(CENTCOM), described how these lessons are
being applied in Afghanistan.126 For an overview
of these lessons, as well as a summary of how
DoD states that it is applying these lessons or
how CENTCOM believes these lessons should
be applied, see Table 2.9. ◆
CONTRACTING
Table 2.9
DoD’s Application of Hard Lessons to Afghanistan
Lesson Learned In Iraq
Applied to Afghanistan
Security is necessary for large-scale reconstruction
to succeed.
17,000 additional troops have been deployed; DoD requested
$3.7 billion in additional funding.
Developing the capacity of people and systems is as
important as brick-and-mortar reconstruction.
The U.S. Engineering Division in Afghanistan contracts 70% of
its proposals to Afghan and Afghan/American firms and has
created training programs to mentor engineering cadets.
Soft programs serve as an important complement to
military operations in insecure environments.
Maneuver units are making adjustments for soft programs.
“Fly-away teams” have been deployed to assist local
governance, and Agribusiness Development Teams are being
deployed.
Programs should be geared to indigenous priorities.
Local projects are vetted to ensure alignment with national
plans. The Special Inspector General for Afghanistan
Reconstruction (SIGAR) is assessing donor strategies based on
national plans and priorities.
Reconstruction is an extension of political strategy.
The USAID Tactical Conflict Assessment Framework Program is
currently being tested.
Executive authority below the President is necessary
to ensure the effectiveness of contingency relief and
reconstruction operations.
The Office of the Secretary of Defense (OSD) should advocate
that DoS Office of the Coordinator for Reconstruction and
Stabilization appoint a single executive agent to coordinate
all contingency relief and reconstruction operations. Establish
joint interagency coordination committee.
Uninterrupted oversight is essential to ensuring
taxpayer value in contingency operations.
SIGAR established offices in Washington D.C., and in Kabul,
with additional presence sought at Kandahar, Bagram, and
with the Combined Security Transition Command-Afghanistan
(CSTC-A) in Kabul.
An integrated management structure is necessary to
ensure effective interagency reconstruction efforts.
U.S. Forces-Afghanistan uses an integrated system to collect
Provincial Reconstruction Team (PRT) reconstruction data.
USAID is developing a common database.
Outsourcing management to contractors should be
limited because it complicates lines of authority in
contingency reconstruction operations.
CSTC-A is investigating methods to prevent outsourcing
management to contractors.
The U.S. government should develop new
contracting rules that permit greater flexibility.
The Under Secretary of Defense for Acquisitions should host
an interagency acquisition advisory panel to draft a single,
interagency Contingency Federal Acquisition Regulation.
The U.S. government needs a new human-resources
management system capable of meeting the
demands of a large-scale relief and reconstruction
operation.
DoD Human Resources Activity should work with the Office
of Personnel Management to sponsor an interagency panel to
draft universal contingency human resources rules.
The U.S. government must strengthen its capacity to
manage the contractors that carry out reconstruction
work in contingency relief and reconstruction.
DoD is adding 720 contract oversight personnel to the
Defense Contract Management Agency over the next 5 years.
DoD, DoS, and USAID signed an MOU to use SPOT.
Diplomatic, development, and area expertise
must be expanded to ensure a sufficient supply
of qualified civilian personnel in contingency
reconstruction operations.
DoS Office of Management Policy is working with the Office
of Management and Budget to provide advice and guidance
regarding the President’s Management Agenda.
Source: Commander, U.S. Central Command, Office of the Commander, Memorandum for the Secretary of Defense, “Applying Lessons Learned in
Iraq to Afghanistan,” 5/24/2009.
JULY 30, 2009 I REPORT TO CONGRESS I
47
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
U.S. RECONSTRUCTION FUNDING USES
SIGIR classifies U.S. reconstruction funding
by its use into 4 reconstruction areas, comprising 17 exclusive sectors. Developments in these
reconstruction areas are discussed in the following Security, Infrastructure, Governance, and
Economy subsections.
For the status of U.S. reconstruction funding
by use, see Table 2.10. For an overview of U.S.
reconstruction funding sources and uses, see
Figure 2.13. ◆
Table 2.10
Status of Major U.S. Reconstruction Funds by Use
Status of Funds ($ Billions)
Quarterly Change
Area
Sector
Allocated
Obligated
Security
Iraqi Security Forces Equipment
7.22
6.25
5.09
0.21 (3%)
0.11 (2%)
Iraqi Security Forces Training
6.01
5.36
5.02
0.24 (5%)
0.03 (1%)
Iraqi Security Forces Infrastructure
5.78
5.47
4.71
0.17 (3%)
0.14 (3%)
Iraqi Security Forces Sustainment
2.60
2.31
2.11
0.10 (5%)
0.13 (7%)
Rule of Law
1.46
1.45
1.23
0.01 (1%)
0.03 (2%)
Related Activities
1.36
1.10
0.93
0.02 (2%)
0.05 (5%)
0.49 (3%)
Infrastructure
Economy
Obligated
Expended
Subtotal
24.42
21.95
19.09
0.75 (4%)
Electricity
5.00
4.97
4.84
0.01 (0%)
0.03 (1%)
Water and Sanitation
2.61
2.61
2.46
0.44 (20%)
0.42 (21%)
0.01 (1%)
Oil and Gas
1.94
1.92
1.91
-
General Infrastructure
1.25
1.24
1.24
-
-
Transportation and Communications
1.08
1.09
1.00
-
0.02 (2%)
0.49 (4%)
Subtotal
Governance
Expended
11.88
11.83
11.45
0.45 (4%)
Capacity Development
2.41
2.17
1.75
0.04 (2%)
0.12 (7%)
Democracy and Civil Society
1.94
1.94
1.61
-
0.02 (1%)
Public Services
1.86
1.86
1.70
0.01 (0%)
0.01 (0%)
Humanitarian Relief
0.81
0.81
0.74
-
-0.01 (-1%)
Subtotal
7.01
6.77
5.80
0.04 (1%)
0.14 (3%)
Economic Governance
0.79
0.79
0.74
-
-
Private Sector Development
0.68
0.67
0.54
-
0.02 (4%)
Subtotal
Total
1.46
1.46
1.28
-
0.02 (1%)
44.78
42.01
37.61
1.2 (3%)
1.1 (3%)
Note: Data not audited. Numbers affected by rounding. Total values for U.S. reconstruction funding by use is lower than U.S. reconstruction funding by source because the status of CERP
funding by project category for prior fiscal year appropriations is unavailable.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, responses to SIGIR data call, 7/4/2009 and 7/18/2009; ITAO, Essential Indicators Report,
5/14/2009; MNC-I, Quarterly Reports, 4/7/2009 and 7/4/2009; OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009.
48 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
U.S. RECONSTRUCTION FUNDING USES
Figure 2.13
Allocations of Major U.S. Reconstruction Funds, as of 6/30/2009
Major U.S. Reconstruction Funds, by Use
Economy
5%
Security
28%
Governance
17%
Sector Allocations, by Major U.S. Fund
CERP
2%
ESF
0.1%
IRRF
24%
IRRF
$20.29 billion
Security
$24.42 billion
ISFF
74%
Infrastructure
50%
Security
100%
ISFF
$18.04 billion
ESF
5%
CERP
11%
Infrastructure
$11.88 billion
IRRF
85%
Economy
9%
ESF
$3.63 billion
Security
1%
Infrastructure
15%
Governance
75%
Unaccounted
for CERP Allocations
CERP
$3.63 billion
11%
IRRF
50%
Governance
$7.01 billion
ESF
39%
Security
16%
CERP
12%
ESF
22%
Economy
5%
Governance
17%
CERP
Economy
$1.46 billion
IRRF
66%
Infrastructure
50%
CERP
100%
Unaccounted
for CERP Allocations
$0.81 billion
Note: Data not audited. Numbers affected by rounding. Total values for U.S. reconstruction funding by use is lower than U.S. reconstruction funding by
source because the status of CERP funding by project category for prior fiscal year appropriations is unavailable.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, responses to SIGIR data call, 7/4/2009 and 7/18/2009; ITAO,
Essential Indicators Report, 5/14/2009; MNC-I, Quarterly Reports, 4/7/2009 and 7/4/2009; OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009.
JULY 30, 2009 I REPORT TO CONGRESS I
49
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
SECURITY
The United States has allocated $24.42 billion127
for programs and projects to develop the Iraqi
Security Forces (ISF), construct related infrastructure, and support increased capacity for the
rule of law in Iraq. For a summary of obligations
and expenditures of the ISFF, CERP, IRRF, ESF,
and International Narcotics Control and Law
Enforcement Fund (INCLE) for security and
justice programs, see Figure 2.14.
The Strategic Framework Agreement and
the Security Agreement between the U.S.
government and the GOI define the future
presence of U.S. security forces. The process of
U.S. troop withdrawal and the Iraqi assumption of full responsibility for security affairs
are the key elements of the current security
relationship between the United States and the
GOI.128 The U.S. government is also committed
to continue support for democratic Iraq’s legal
and judicial institutions.129
On June 30, 2009, Iraqis marked the withdrawal of U.S. combat forces from all cities with
a national holiday. ISF personnel will replace
U.S. forces that have been relocated to bases and
other staging locations in Iraq. Some U.S. forces,
however, remain in the cities embedded with the
ISF as advisers and liaison officers who would be
able to call on U.S. rapid-reaction forces if needed.130 While they remain in Iraq, U.S. forces will
conduct operations with the ISF as requested.
Joint efforts are designed to provide a layered
defense, with the ISF securing the cities and the
Multi-National Force-Iraq (MNF-I) securing
belts and borders to eliminate safe havens and
deny freedom of movement to terrorists.131
Plans in support of security and justice programs in Iraq emphasize training and equipping
50 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
the ISF and executing the Rule of Law Strategic
Action Plan (RoLSAP). These activities are
coordinated by the U.S. Embassy and include
the following:
• Existing ISFF appropriations are programmed
to set up a nationwide force-training project
to meet force-generation requirements while
continuing to support the acquisition of necessary equipment.
• The RoLSAP would extend capacity-development programs in the ministries and PRT
activities in the provinces, while existing infrastructure projects (such as prisons) are being
transferred to the GOI.
THE UNITED STATES WILL
PURSUE A NEW STRATEGY
TO END THE WAR IN IRAQ
THROUGH A TRANSITION TO
FULL IRAQI RESPONSIBILITY….
THERE WILL SURELY BE DIFFICULT PERIODS AND TACTICAL
ADJUSTMENTS. BUT OUR
ENEMIES SHOULD BE LEFT
WITH NO DOUBT: THIS PLAN
GIVES OUR MILITARY THE
FORCES AND FLEXIBILITY
THEY NEED TO SUPPORT OUR
IRAQI PARTNERS, AND TO
SUCCEED.132
—PRESIDENT
BARACK OBAMA,
FEBRUARY 27, 2009
Figure 2.14
Security—Status of Funds
$ Billions
$25
Change Over
Quarter
Year
13%
4%
$23
Allocated $24.42
$21
Obligated $21.95
4%
16%
Expended $19.09
3%
20%
$19
$17
$15
Q4
Q1
FY 2008
ISFF
IRRF
CERP
ESF
Allocated
$18.04
$5.77
$0.58
$0.03
Q2
Q3
FY 2009
Obligated
$15.57
$5.77
$0.58
$0.03
Expended
$12.98
$5.63
$0.45
$0.03
Note: Data not audited. Numbers affected by rounding.
Sources: MNC-I, Quarterly Report, 7/4/2009; ITAO, Essential Indicators Report,
5/14/2009; DFAS, response to SIGIR data call, 4/10/2009; DoS, response to SIGIR
data call, 4/5/2007; U.S. Embassy-Baghdad, response to SIGIR data call, 7/6/2009;
OSD, responses to SIGIR data call, 7/2/2009 and 7/13/2009.
SECURITY
Figure 2.15
Military Fatalities in Operation Iraqi Freedom, 3/2003–6/2009
Cumulative Fatalities
5,000
4,321
4,000
U.S. Fatalities
3,000
2,000
1,000
Non-U.S. Coalition Fatalities
316
0
2003
2004
2005
2006
2007
2008
2009
Note: Excludes Iraqi Security Forces fatalities.
Sources: Brookings Institution, Iraq Index, 6/25/2009, pp. 15, 17; DoD, “Operation Iraqi Freedom U.S. Casualty Status,” 7/2/2009.
U.S. Security Personnel and
a New Operating Environment
The transition of security responsibilities pursuant to the Security Agreement provides for the
withdrawal of U.S. combat forces from Iraqi
cities by June 30, 2009, and the withdrawal of
U.S. forces from Iraq by December 31, 2011. The
U.S. basing and staging footprint has also shifted.
MNF-I reports that 142 U.S. bases have been shut
down or handed over to the Iraqi government,
bringing the total number of bases and other
locations occupied by U.S. forces to about 320.133
Contracting for private security has been on the
rise. Private security contractors (PSCs) operate under rules of engagement prescribed by the
GOI, and their movements are coordinated with
U.S. military commands.134
In Baghdad, security restrictions appear to
be easing, with many temporary concrete walls
being removed from urban areas as part of a
broader normalization process. Officials of the
GOI believe that the ISF is capable of assuming
security responsibility for the departing multinational force.135 However, the Minister of Interior acknowledged that U.S. forces still play an
important role, pointing to the many sacrifices
they have made to help bring Iraq to its current
security and stability.136 Since the beginning of
Operation Iraqi Freedom through July 3, 2009,
4,321 U.S. personnel have been killed and more
than 31,350 have been wounded in action.137 For
a timeline of casualties sustained by the U.S.
forces, see Figure 2.15.
Since the United States deployed its surge
strategy in 2007, security incidents markedly
declined. In 2007, about 900 incidents were carried out weekly. In 2008, that number dropped
to 200, and this year, fewer than 100 incidents
have been occurring each week.138 Although the
overall security situation in Iraq has improved
since 2008, the recent spike in mass-casualty
incidents shows that terrorist attacks continue to
pose gravest serious security challenge.139
July 30, 2009 I REPORT TO CONGRESS I
51
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
This quarter, a wave of suicide bombings
culminated in a series of 404 bombs detonated
across Iraq, bringing the total Iraqis killed this
quarter to about 1,000.140 Although insurgent activity across the country has declined in the past
12 months, al-Qaeda and other extremist elements continue to demonstrate their ability
to conduct major attacks against government
officials, security forces, and the local population
in an attempt to undermine public confidence in
the government’s ability to provide effective security.141 For information about daily and annual
security incidents and their locations since 2003,
see Figure 2.16.
For the status of security personnel operating
in Iraq, see Table 2.11.
The United States complied with the terms of the Security
Agreement, withdrawing all U.S. combat forces from Iraqi cities
by June 30, 2009. (Army.mil photo)
Figure 2.16
Security Incidents and Iraqi Civilian Fatalities, 1/2004–6/2009
Average Daily Incidents and Estimated Average Daily Fatalities, by Month
250
200
150
Daily Fatalities
Daily Incidents
100
50
0
2004
2005
2006
2007
2008
2009
Annual Incidents per 10,000 People, by Province
> 20 incidents
10–20 incidents
2–10 incidents
0–2 incidents
Note: Incidents include attacks against Iraqi infrastructure and government organizations; bombs that are found and cleared (including IEDs and mines);
detonated bombs; sniper, ambush, grenade, and other small arms attacks; and mortar, rocket, and surface-to-air attacks.
Sources: MNF-I, responses to SIGIR data call, 10/6/2008 and 7/2/2009; CENTCOM, response to SIGIR data call, 1/10/2009; Iraq Body Count,
www.iraqbodycount.org, accessed 7/3/2009; Brookings Institution, Iraq Index, 6/25/2009.
52 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
SECURITY
Table 2.11
Security Forces In Iraq
Assigned
Personnel
Service
U.S. Forces
Private Security Contractors
a
Trend
Status
130,000
All U.S. combat forces out of the
cities, June 30, 2009
30,000
All agencies assessing their PSC
status
Iraqi Security Forces
Ministry of Defense
b
Iraqi Army (IA)
Training and Support
Ministry of Interior
Counter-Terrorism
b
201,356
23,452
Recruiting freeze due to budgetary
constraints
Working on improving force
generation
Air Force
2,006
Building capabilities
Navy
1,898
Developing capacity
Total MOD
228,712
Iraqi Police
291,520
Working toward independent
force management
National Police
51,766
Improving logistics and training
Border Enforcement
42,431
Training in preparation
for drawdown
Oil Police
29,411
Oil infrastructure security slowed
by hiring freeze
c
Facilities Protection
Service (FPS)
87,000
Total MOI
502,128
Special Operations
4,160
ISF Total
735,000
Grand Total
858,996
Pending reform legislation to make
FPS a formal department under
the MOI
Pending CoR reform legislation to
become a new Iraqi ministry
Note: Numbers affected by rounding.
a PSC numbers shift continually based on changing contract activity and level of security services required. Total reflects SIGIR’s estimate.
b Assigned numbers illustrate payroll data; they do not reflect present-for-duty totals; approximately 112,000 MOI employees are not included in
ISF numbers.
c FPS personnel are not counted in the official MOI rosters because they are contracted and reform legislation has not been passed.
Sources: SIGIR, Quarterly and Seminannual Reports to the United States Congress, 1/31/2009 and 4/30/2009; OSD, response to SIGIR data call,
4/2/2009; DoD, Measuring Stability and Security in Iraq, 12/31/2008; OSD, response to SIGIR data call, 7/1/2009.
July 30, 2009 I REPORT TO CONGRESS I
53
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Status of U.S. Forces
As of June 30, 2009, approximately 130,000 U.S.
forces remain in Iraq, and by August 2010, their
combat mission is scheduled to transition to
a support role, conducted by 35,000 to 50,000
military advisors and trainers.142 Concomitant
with the planned force drawdown, the United
States will make organizational changes within
the U.S. force structure. MNF-I will be replaced
by U.S. Forces-Iraq (USF-I). Additionally, the
Iraq Security Assistance Mission (ISAM)143 and
the Iraq Training and Advisory Mission (ITAM)
will assume the functions now performed by the
Multi-National Security Transition CommandIraq (MNSTC-I).
The advisory and training mission organizations will report to the Deputy Commanding
General of ITAM under the Commanding
General for USF-I, as well as to DoS offices in
the Embassy, continuing joint mission oversight.144 ITAM will work to hand over its policetraining mission as soon as DoS is ready to accept it. ISAM will then be the core of the Office
of Security Cooperation operations, which will
serve under the U.S. Embassy as directed by
MNF-I/USF-I command and control transformation guidance.145
For an overview of the U.S. Embassy security
operations organization, see Figure 2.17.
Private Security Contractors
Although the total number of contractors
working in Iraq appears to have decreased,
DoD contracting for PSC support has increased
by 23% since January 2009.146 PSCs coordinate
the efforts of Security Escort Teams (SETs) and
Reconnaissance Liaison Teams (RLTs) through
a system of reconstruction support centers.
SETs escort military and civilian personnel,
providing security for visits to construction
54 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Figure 2.17
U.S. Embassy Security Operations Organizational Chart
MNF-I
Commanding
MNF-I
Commanding
General
General
Ambassador
Deputy Chief of Mission
Deputy
ChiefAssistance)
of Mission
(Transition
Deputy Chief of Mission
Deputy Chief
of Mission
(Primary)
Political-Military Planning
Coordinator
Security and
Operations
Hostage Affairs
Plans and
Agreements
Regional
Diplomacy
Regional Security
Protective Ops
Regional Ops
Embassy Ops
Investigations/
Intel
Source: U.S. Embassy-Baghdad, response to SIGIR data call, 7/16/2009.
sites. RLTs visit communities and local leaders
to develop a positive support relationship, and
they conduct technical inspections of ongoing
construction projects.
Although the Security Agreement has not yet
caused any significant change to these security
activities, GRD reports that its coordinating role
will draw down over the next year. As the reconstruction work load decreases, GRD will adjust
its PSC contractor support accordingly.147
Under current host-nation regulations, in
order to carry weapons, PSC personnel in Iraq
must work for a private security contractor that
has been properly registered and licensed with
the GOI authorities, including the Ministries of
Trade and Interior. DoD-affiliated PSCs must be
properly licensed to carry arms, and they must
receive CENTCOM/Coalition forces approval
for their operations. Two days before the Security
Agreement between the United States and
Iraq took effect, on December 30, 2008, Iraq’s
Ministry of Interior (MOI) issued an order that
Marine
Security Guard
Detachment
SECURITY
U.S. soldiers attend a transfer of authority ceremony for Joint Security Station eastern Baghdad.
(MNF-I photo)
established joint committees to review existing
policies pertaining to PSCs and to develop new
policies and procedures. Committee members
include representatives from MOI, GOI, MNF-I,
and U.S. Embassy-Baghdad. Joint Contracting
Command-Iraq/Afghanistan (JCC-I/A) participates as requested.
The committee has been discussing and
implementing guidance on several key issues,
including:148
• licensing of contractors
• registration of firearms and personal
security weaponry
• vehicle registration
• licensing of pilots and aircrafts related to
personnel and security operations
• customs, duties, tariffs, taxation,
and inspections
• entry/exit procedures and use of DoD assets
to transport members of the U.S. forces, DoD
civilian component, U.S. contractors, and U.S.
Embassy personnel
DoD and DoS continue to coordinate with the
GOI regarding the legal accountability of U.S.
contractor personnel as well as PSC operational
and security operations. This quarter, SIGIR issued an audit on coordination between the U.S.
military and PSCs in Iraq, finding that the use
of contractors has not been without problems,
including incidents between PSCs and Iraqis as
well as U.S. forces. In late 2007, DoD and DoS
began making organizational and procedural
changes to strengthen their oversight, coordination, and control of PSC activities. SIGIR’s audit
was conducted to obtain field commander’s
opinions on the effect of those changes and to
address the requirements of Section 842 of the
National Defense Authorization Act for FY 2008
(Public Law 110-181), which encourages oversight
agencies to identify the extent to which field
commanders have been able to coordinate or
direct the performance of contractors in areas of
combat operations.
SIGIR’s audit found that field commanders generally believe that the new control and
coordination procedures have been effective in
ensuring that PSC operations are not inconsistent with ongoing combat operations. SIGIR
had previously reviewed the reporting, investigation, and remediation of serious incidents
involving PSCs, finding that improved oversight
and coordination of serious incidents could be
achieved by establishing core standards, policies,
and procedures early in a contingency. SIGIR
identified this as a lesson learned, and the audit
released this quarter provides further evidence of
the importance of these activities.149
SIGIR also conducted an audit on investigation
and remediation records concerning incidents
of weapons discharges by PSCs. SIGIR found
that from May 2008 through February 2009, 109
incidents of weapons discharges were reported by
July 30, 2009 I REPORT TO CONGRESS I
55
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
PSCs and recorded in DoD databases. Although
DoD has improved its tracking of these incidents,
it did not have supporting documentation to
verify the actions taken on 56 of these incidents.
As such, it was difficult, and sometimes impossible, to determine the total number of actions
taken to investigate and remediate the incidents,
including the actions taken against the PSCs in
this timeframe.150
SIGIR Joint Audit of Private Security Contracting
A joint audit by SIGIR and DoS OIG reviewed
funding and performance under Blackwater Security Consulting contracts to provide personal
protective services in Iraq. The estimated costs
for DoS contracts and task orders awarded to
Blackwater (which has since changed its name
to Xe) totaled more than $1 billion as of May
29, 2008. The contracts are funded primarily
with DoS Diplomatic and Consular Programs
funds and about $76 million from the IRRF. The
report presented these findings:151
• DoS officials in Iraq did not establish or
perform measures to confirm the accuracy
of labor costs used as the basis for contract
billing. Monthly invoices from the contractor
were paid without adequate review of support
documentation.
• Full manning of protective details is important to the safety of the principal being
protected, as well as for the members of the
protective detail. However, penalties for
noncompliance with contract staffing requirements were not assessed.
• Blackwater’s travel costs were not adequately
reviewed. Ineligible travel costs of $127,364
were paid for airfare in excess of coach fare.
During the audit, the contracting officer recovered $56,457 of the total amount ineligible
under the contract.
56 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
U.S. forces patrolling the borders. (MNF-I photo)
• Contract oversight files required by the contracting officer’s representatives were not easily
accessible and may not be complete in Iraq and
at headquarters.
Iraqi Security Forces
Although DoD believes “the ISF continues to
demonstrate a growing capability and confidence
in providing for security and leading operations
in their country,”152 there are also indications that
the performance of a self-sustaining and fullspectrum-capable ISF remains in question.153 The
training of security personnel has not kept pace
with the build-out of force strength, and this lag
is the justification for ISFF-funded training base
plans through 2009 and 2010.154
MNSTC-I advisory teams continue to
work closely with both the MOD and MOI to
improve the accuracy and frequency of their
personnel reporting systems. The number of
SECURITY
Figure 2.18
Estimated ISF Force Strength, Cumulative, by Quarter
800,000
600,000
Forces
Authorized
400,000
Forces Trained
200,000
0
2005
2006
2007
2008
2009
Note: Cumulative number of Iraqi Army, Air Force, Navy, Iraqi Police, National Police, Border Enforcement, and
Special Operations Personnel. June 2009 data is a SIGIR estimate.
Sources: DoD, Measuring Stability and Security in Iraq, 7/2005, 10/2005, 2/2006, 5/2006, 8/2006, 11/2006, 3/2007,
6/2007, 9/2007, 12/2007, 3/2008, 6/2008, 9/2008, 12/2008; DoS, Iraq Status Report, 3/18/2009; OSD, response to
SIGIR data call, 7/14/2009.
Table 2.12
SOI Personnel Transitioned to GOI and ISF Positions,
as of 6/30/2009
Date of Transfer
New Organization
6/2007–9/2008
(Date of program inception
to Iraqi PM Order 118C)
ISF
8,777
Non-security GOI
positions
2,364
Subtotal
11,141
10/2008–6/2009
(Date of Order 118C to present)
ISF
4,565
Non-security GOI
positions
1,717
Subtotal
Total Transitioned
Number of Personnel
6,282
17,423
Source: OSD, response to SIGIR data call, 7/2/2009.
MOI personnel assigned continues to exceed
personnel trained. Training centers have not
been able to keep up with the pace of hiring in
2007 and 2008, as well as the return of former
Iraqi Army personnel, who must be scheduled for retraining. Additionally, as missions
are transferred to the MOI—(such as the Oil
Police, Electricity Police, and Facility Protection Service (FPS)—personnel are transferred
with limited training and inadequate equipment, creating a backlog of untrained and
uncertified personnel.
Efforts to train MOI instructors and build infrastructure are part of the capacity-development
program, which is designed to address the immediate shortfalls. But a focus on procurement,
distribution, and sustainment is still needed to
ensure that the ISF is adequately equipped.155
More than 648,000 Iraqis now serve in the
MOI, MOD, and Iraqi National Counter-Terrorism Force (See Figure 2.18).156
Status of Sons of Iraq
Since the Sons of Iraq (SOI) program was transferred to complete GOI control in April 2009, no
SOI members have been transitioned into ISF or
ministry jobs because the MOD and MOI are
currently under a hiring freeze. Between January
2006 and June 2007, before the inception of the
SOI program, 8,206 members of the original
al-Sahwa movement had transitioned into the
Anbar provincial police.157 For the timeline of
personnel transitioned from the 94,000 SOI
force, see Table 2.12.
In April 2009, the U.S. government allocated
$1.27 million of the CERP to close out Coalition
responsibility for SOI pay in portions of Baghdad, Qadissiya, and Salah Al-Din provinces. No
U.S. funds have been used since May 2009 to
support the SOI program, nor are there plans in
the future to continue using CERP funding for
this purpose. The GOI now pays for all salaries
as well as any SOI vocational programs.158
Key leaders from MNC-I’s reconciliation and
engagements cell (the U.S. government’s liaison
for the SOI program) and GOI’s committee for
national reconciliation meet biweekly to discuss
July 30, 2009 I REPORT TO CONGRESS I
57
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
current SOI topics, including pay, transition, and
the arrests of SOI leaders. This quarter, the most
challenging issue was ensuring the availability
of funds required to pay the SOI. Because of
the decline in oil prices, the GOI went through
several revisions of its 2009 budget, which caused
a delay in paying the SOI members. The GOI
has since rectified this situation and allocated
enough money to fund salaries through the end
of this year.159
U.S. forces continue to work closely with the
GOI to ensure the more than 88,000 remaining
SOI members receive pay under the Iraqi-controlled program.
Since November 2008, 41 SOI leaders have
been arrested, and 6 have been released. Most of
the SOI leaders have been arrested under charges
of terrorism. Although some arrests appear to
have been made for valid reasons, there is concern that a portion may be the result of sectarian
or politically driven agendas.160
Iraqi Women in the ISF
The United States has launched a wide spectrum
of programs to help Iraqi women achieve equal
protection under the law. Provincial Reconstruction Teams run 48 assistance projects for women.
Training centers in Baghdad and Basrah funded
by the DoS Bureau of Democracy, Human
Rights and Labor (DRL) provide women with
job skills. DRL also funds a $5 million program
specifically for widows. MNF-I has trained hundreds of female security personnel as part of its
strategy to thwart female suicide bombers.161
The Daughters of Iraq (DOI) are breaking
traditional societal norms to help authorities
counter al-Qaeda’s use of women to carry out
suicide bomb attacks. The security program
began in October 2008 as an unarmed spin-off
of the SOI. DOI personnel work with the Iraqi
58 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Training of female Iraqi police recruits at the Kirkuk Police Academy. (DoD Photo)
Police to search women at checkpoints to reduce
the threat posed by female suicide bombers as
well as male bombers who disguise themselves as
women.162 Recently, the GOI has seen increased
demand for female security personnel because of
the sharp rise in female suicide bombings.
U.S.-funded Security Programs
Since 2003, the United States has allocated $24.42
billion and obligated $21.95 billion for programs
to develop Iraq’s security and justice capacity. As
of June 30, 2009, $2.47 billion remains for obligation and $5.34 billion for expenditure.163 Continuing funding is directed at programs intended
to develop ISF capacity (training) and capability
(sustainment and equipment).
Historically, funding has also supported
security-related infrastructure projects. Since
2004, ISFF has provided for the construction of
SECURITY
609 police stations throughout Iraq, in addition to the rehabilitation and construction of
border forts, ports of entry, and training centers
for MOI. The total cost of construction to date
is nearly $1 billion.164 The authority to obligate
ISFF for infrastructure projects is set to expire on
September 30, 2009.
MNF-I reports that although CERP funding
remains integral to U.S. security programs, the
impact of a reduction of $247 million of the $747
million originally planned for FY 2009 can be
mitigated. Moreover, it does not expect the June
30, 2009, U.S. troop withdrawal from the cities
to change plans for executing $500 million in
FY 2009.165
The decreased level of U.S. funding for Iraqrelated activities in FY 2009 is consistent with the
MOD and MOI assuming increased operational
and strategic control from U.S. forces.166
SIGIR Inspection of the Iraqi Army Barracks
This quarter, SIGIR inspected the Iraqi Army
Headquarters Barracks in Missan, Iraq. The
$1.2 million contract was for the construction
and renovation of several buildings and facilities,
including an office building, toilets and baths,
and roadways. Contractors also installed a generator, fuel tanks, and other equipment. The facility
was turned over to the GOI in March 2008.
SIGIR did not observe any signs of structural
failure or distress, concluding that aside from
minor construction defects, safety concerns, and
damage from improper use, the construction
was adequate and was turned over to the GOI
in a sustainable condition. SIGIR recommended
that GRD locate the detailed construction drawings and design calculations for the new battalion headquarters building and maintain them in
the project file records.167
U.S. Security Program Strategy
The GOI continues to assume broader
ownership for and increasing fiscal commitment to its security forces and to programs
that support the MOD and MOI. Although
funded below their budget requests, both the
MOI and MOD continue to show progress in
developing ministerial capacity, albeit slowly
and unevenly.
To expand institutional capacity, Coalition
mentorship and partnership will be necessary
for some time to overcome decades of isolation
and stagnation in law enforcement and military
education and training. A lack of capacity to
train civilian management, a shortage of training
staff, deterioration of some facilities, and an inability to fill many positions with trained personnel are challenges that continue to hinder these
ministries. Currently, many of the Iraqi civilians
working for the MOD and MOI are not yet fully
trained and qualified for their positions. Furthermore, many are reluctant to pursue technologyfocused training.168
Plans call for ITAM to provide direction, oversight, and assessment of institutional-level training, advisor support for the ministries, and assistance to the ISF to support force generation, build
capacity, develop and enhance key capabilities,
and improve competence and professionalism.169
As part of the transition to the ISF, MNF-I
developed the Training Base 2009 program to
serve as a basis for MOD planning. The goal is to
institutionalize training in the Iraqi Army and
ensure that these priorities are met:170
• Identify force generation and replenishment
requirements.
• Continue the professionalization of the Iraqi
Army through specialty training and courses
for non-commissioned officers.
July 30, 2009 I REPORT TO CONGRESS I
59
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
• Institutionalize battalion tactics through the
Warfighter Exercise Program.
• Train Iraqi Army units on the M1A1 Tank;
60mm, 81mm, and 120mm mortars; and other
heavy artillery.
This quarter, capacity development for force
generation at the MOI continued as U.S. funding
shifted from sustainment and training to provision of more equipment and transportation support.171 MNSTC-I continues support for both the
MOI and MOD to develop professional training
capacities. For a summary of FY 2009 revised
budget line items, see Table 2.13.
Building Maintenance Capacity
Establishing logistics-capable units remains a
top priority of U.S. programs that provide force
training, sustainment, and equipment. Efforts to
expand ministerial capacity within the MOD and
MOI are also ongoing and viewed as important to
the GOI’s ability to assume security responsibilities. These activities, which are broadly consistent
with typical U.S. assistance to foreign security
forces,172 require the full support of the relevant
Iraqi parties. There appear to be significant challenges, however, to the GOI’s commitment to
maximize the training and capacity development
opportunities, which will have a proportionately
negative impact on the development of a logistics
and sustainment capability.
a significant milestone on March 4, the first
M1114 Humvee to be totally rebuilt rolled out
of the Main Wheel Assembly & Disassembly
facility. Iraqi Army mechanics accomplished
the rebuild as part of a six-month, supervised
on-the-job training program at the depot.174 But
a recent SIGIR audit questioned whether Iraqi
military forces would be able to perform maintenance repairs, even at a low rate of production,
by the end of the year.
SIGIR’s recent audit examined a $350 million
MNSTC-I contract (funded by the ISFF) to complete the Taji National Maintenance Depot, in
Baghdad province. Construction has been conducted in seven phases, and the contract audited
was intended to complete the final four phases:
procuring and installing equipment, training
Iraqi soldiers and civilians in depot maintenance
and operations, initiating operations, and transitioning the depot to Iraqi control.
Table 2.13
Iraq Security Forces Fund Spend Plans
$ Millions
FY 2008/FY 2009
Sub-Activity
Group
MOD
A GOI-run national logistics base in an important component for building a self-sustaining
security force. The United States has invested
in the multiple phases of the Taji National
Maintenance Depot’s development, which is
scheduled to be completed and transitioned to
full Iraqi control by January 1, 2010.173 Marking
MOI
Other
Total
FY 2009
Bridge
Request
Spend Plan
154.7
173.9
91.8
91.8
Equipment
917.9
925.0
1,030.1
260.1
196.5
Training
116.1
192.4
234.0
Infrastructure
298.5
298.5
0.0
0.0
1,487.2
1,589.8
1,355.9
548.4
106.0
66.0
20.0
20.0
Sustainment
Equipment
392.0
432.0
125.6
125.6
Training
650.0
650.0
417.2
231.0
Infrastructure
110.0
110.0
0.0
0.0
MOI Subtotal
1,258.0
1,258.0
562.8
376.6
254.8
152.2
96.2
75.0
3,000.0
3,000.0
2,014.9
1,000.0
Related Activities
Note: Data not audited. Numbers affected by rounding.
Source: OSD, response to SIGIR data call, 7/2/2009.
60 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Revised
Spend Plan
Sustainment
MOD Subtotal
National Maintenance Support
Previously
Approved
(9/2008)
FY 2009/FY 2010
SECURITY
Table 2.14
Location Commands
Regional Maintenance
$ Millions
Location Command
Province
Fund
Kirkush
Diyala
ISFF
Cost
$7.35
Kirkuk
Tameem
ISFF
$7.95
al-Na’maniya
Wassit
ISFF
$7.75
Taji
Baghdad
ISFF
$21.91
Habbaniyah
Anbar
ISFF, QRF
$21.46
Tallil
Salah Al-Din
ISFF, QRF
$28.80
$12.50
Hammam
Ninewa
ISFF
al-Kasik
Ninewa
ISFF, QRF
$6.78
Shaiba
Basrah
ISFF, FMS
$40.67
al-Asad
Anbar
ISFF
Total
$9.24
$163.83
Notes: Numbers affected by rounding.
Source: OSD, response to data call, 7/6/2009.
SIGIR auditors found that the cost of this
contract, which currently totals $220 million, is
likely to increase because of repairs for serious
safely hazards and electrical problems related to
earlier phases of the contract. It also concluded
that the possibility that the depot will transition to an Iraqi-controlled operation capable of
low-rate production by the contract’s deadline of
December 31, 2009, is remote. Insufficient equipment has forced training to be canceled or scaled
back. However, a larger impediment has been a
lack of Iraqi commitment to the training.
About half of the assigned students are absent
at any given time for a variety of reasons. As of
May 31, 2009, only 74% of the required workforce
had completed training, and even the trained
workers’ skill level was assessed as “marginal.”
Although contract management has improved
over earlier periods, and MNSTC-I has taken
measures to address the previous deficiencies,
the capability of the Iraqi Army to provide military depot maintenance appears at risk.175
The Taji depot provides the highest level of
maintenance support capability for repair and
upkeep of Iraqi Army equipment and vehicles. In
addition, regional facilities, called Location Commands (LCs), provide second-tier maintenance
support for Iraqi Army units around Iraq. Under
the Global Maintenance and Supply Services
(GMASS) contract, facilities and equipment have
been provided for 10 LCs (see Table 2.14).176 SIGIR
recently examined contracts intended to support
the Iraqi Army training and sustainment logistics
capability as well as the construction of the physical infrastructure of an LC.
Last quarter, SIGIR performed an audit of
the GMASS in Iraq.177 This contract supports a
MNSTC-I program to assist the Iraqi Army in
developing a logistics capability so that it can be
self-sufficient. SIGIR found that the effort fell
well short of achieving the important goal of
training Iraqi Army personnel to perform certain maintenance functions and operate a supply
system. Notably, the Iraqi Army did not provide
a sufficient number of soldiers for training.
Although SIGIR determined that the Iraqi Army
had some maintenance capability, it was unclear
whether that capability was sufficient to assume
all maintenance activities without contractor
support. Additionally, it was unclear if the Iraqi
Army was capable of independently operating
its supply system. To address these problems,
MNSTC-I had planned to continue the existing
task order for maintenance and supply system
support—a task order that had previously been
modified 161 times.
This quarter SIGIR issued an audit on the
Tikrit Location Command as part of its legislative requirement to prepare a final forensic
audit on funds made available for Iraq relief and
reconstruction. This review examined the
July 30, 2009 I REPORT TO CONGRESS I
61
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
$37.8 million project to construct a new area
support base for the Iraqi Army. This joint effort
between MNSTC-I and ITAM was funded by
the ISFF. JCC-I/A awarded the contract and is
responsible for contract oversight, but the GRD
North District provides program management
and engineering oversight.
As of May 31, 2009, the contractor was meeting the requirements of the contract, and cost
disbursements were commensurate with management’s estimate of the construction status.
The GRD program manager estimates that overall construction is 78% complete, and both the
GRD manager and the contractor believe that
construction will be completed by the end of the
current period of performance, which is September 26, 2009. MNSTC-I has an asset transfer plan
in place and is working with the GOI to address
several training and sustainment issues ahead of
project transfer.178
Foreign Military Sales
The Foreign Military Sales (FMS) program
allows the GOI to rebuild and strengthen the
ISF through purchase of U.S. defense equipment, services, and training. The program
has been in use in Iraq since 2005, and all
contracting is administered through the DoD
acquisition system.179
As of June 30, 2009, the GOI had implemented 134 FMS cases, obligating $4.88 billion to buy
military equipment, supplies, and training from
the United States.180 At any time, there may be
cases that have been signed but not funded (or
that are in the process of being funded). However, the GOI has demonstrated in signing these
cases that it has sufficient funds available for payment.181 See Figure 2.19 for more details.
62 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Figure 2.19
Foreign Military Sales to the GOI
$ Billions, Cumulative by Fiscal Year Quarter
$6
Obligated by the GOI
$5
$4
$3
$2
$1
Delivered to the GOI
$0
Q2
Q3
Q4
Q1
FY 2008
Q2
Q3
FY 2009
Note: Numbers affected by rounding.
Sources: DoD, Measuring Stability and Security in Iraq, 3/2008, 12/2008, and 3/2009; DSCA, response to SIGIR data
call, 10/15/2008; MNSTC-I, response to SIGIR data call, 4/2008; OSD, Principal Deputy Assistant Secretary of
Defense, Global Security Affairs, SIGIR interview, 7/7/2008; OSD, responses to SIGIR data call, 4/2/2009 and
7/1/2009.
U.S. Programs To Support
the Rule of Law
Judicial security remains a prime concern for the
GOI, and the United States continues to assist
efforts to safeguard judges and their families.
Given the long history of distrust and lack of
cooperation between the MOI and the Higher
Judicial Council (HJC), the progress made this
quarter is especially noteworthy. In Ninewa
province, for example, U.S. advisors assisted
MOI and HJC in conducting a province-byprovince assessment of the judicial security
needs of every member of the Iraqi Judiciary. The
HJC and MOI have agreed to collectively address
the needs once determined.
The U.S. Embassy’s Rule of Law Coordinator
(RoLC) directs a range of programs to address
the needs of Iraq’s court systems, its correctional facilities, and other capacity-development
SECURITY
Figure 2.20
U.S. Embassy-Baghdad Rule of Law Organizational Chart
MNF-I Commanding General
Ambassador
Deputy Chief of Mission
Deputy Chief of Mission
(Transition Assistance)
(Primary)
Rule of Law Coordinator
Senior Consultant to the
Ministry of Interior (MOI)
Justice
Senior Consultant to the
Ministry of Justice (MOJ)
Federal Bureau of
Investigation
Department of
Homeland Security
Marshals
Major Crimes
International Criminal
Investigative Training
Assistance Program (ICITAP)
Alcohol, Tobacco, Firearms,
and Explosives Attaché
Bureau of International
Narcotics and Law Enforcement
Affairs (INL)
Source: U.S. Justice Attaché (Baghdad), "Rule of Law Organizational Chart," 7/16/2009.
activities to support the rule of law. The Coordinator is responsible for overseeing all RoL activities and policies internally within the Embassy
and externally with the GOI (Chief Justice
and HJC), as well as with MNF-I and Task
Force-134, which oversees detainee command
and control operations.182 For the Embassy’s RoL
organizational structure, see Figure 2.20.
Development of the Rule of Law
The Rule of Law Strategic Action Plan, approved
by the Chief of Mission in February 2009, guides
U.S. activities to support the GOI. Activities are
focused on these three priorities:
• creating a judicial security plan that reconciles
efforts of the HJC and MOI
• coordinating civilian and military efforts
to provide effective detention policies and
improve the efficiency of detainee processing
and release
• building capacity through rule-of-law efforts at
the provincial level, working through the PRTs
However, according to the RoLC, the Rule of
Law mission in Iraq faces many challenges: the
program lacks sufficient funding; endemic corruption pervades many GOI institutions; and
the Iraqi rule-of-law infrastructure, including
court and correctional facilities, has yet to fully
recover from deterioration permitted by the
prior regime and resulting from war.183
In March 2009, the RoLC assigned Provincial RoL Liaison Officers to support each of
the provinces. These assignments are patterned after those of the Office of Provincial
Affairs desk officers, providing support for
these activities:184
• quickly capture provincial RoL developments,
accomplishments, and challenges
• provide more uniform and cohesive policy
guidance for the provincial RoL mission
• coordinate more broadly and effectively with
military counterparts at all levels
July 30, 2009 I REPORT TO CONGRESS I
63
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.21
Rule of Law Assistance to GOI's Judicial System
Dahuk
Erbil
Ninewa
Tameem
Sulaymaniyah
Salah Al-Din
Baghdad
Diyala
Anbar
Wassit
Kerbala
Babylon
Qadissiya
Missan
Thi-Qar
Najaf
Basrah
Muthanna
PRT Rule of Law Advisor
New or Upgraded Courthouse
Source: DoS, “INL Report on Courthouses,” 10/2008.
64 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
SECURITY
For the locations of U.S. rule-of-law assistance
around Iraq, see Figure 2.21.
Capacity Development
The DoS Bureau of International Narcotics and
Law Enforcement Affairs (INL) and the HJC
have worked to develop the Judicial Education
and Development Institute (JEDI) curriculum
survey, which has been circulated for comment.
The value of this survey was such that additional
surveys for the information technology department and court administration staff have been
requested by HJC. Members of the Iraq Justice
Integration Project were asked to brief the Iraqi
National Security Council on lessons learned as
well as its best-practices model for operations on
the merits of the project. These insights will be
used by the GOI in planning a government-wide
system for sharing information. The HJC’s information technology department is now launching a portion of the case-management pilot site
based on technical support provided in 2008.
INL funding has been committed for the third
quarter of FY 2009.
The installation of the JEDI began in October
2008 and has proceeded according to timelines
revised to accommodate HJC guidance as well as
major changes to the security plan. Classrooms
have been scheduled for August, and final handover is expected by September.185
Prison Update
This quarter, SIGIR inspected the U.S.-built
Chamchamal Prison at a cost of more than $32
million, which is designed to hold 3,000 inmates:
1,000 high-security and 2,000 medium-security
prisoners. Dormitories at the facility also accommodate approximately 400 staff members. Although turnover of the facility occurred on March
19, 2009, the prison sits empty. The prison warden
has said that 1,200 guards are needed to operate
3 security shifts, and the Ministry of Justice does
not have sufficient funds to hire them or to pay for
fuel for the facility’s electric generators.186
For an update on U.S. prison projects, see
Table 2.15.
Protection Services for Iraq’s Judges
In coordination with the HJC, INL advisors visited five provinces and completed seven vulnerability assessments as a first step in developing
curricula to be taught at JEDI and enhance the
Table 2.15
Ongoing INL-Funded Prison Construction
Cost to
Complete
Prison
($ Millions)
Basrah
Central
9.7
Fort Suse:
Phase I
5.6
Fort Suse:
Phase III
11.1
Nassriya:
Phase II
8.0
% Complete
(as of 6/30/2009)
Fund
Est. Date of
Completion
Est.
Capacity
Basrah
22%
INCLE
11/6/2009
1,200 beds
Sulaymaniyah
87%
INCLE
7/15/2009
689 beds
The Iraqi Correctional Services failed to sign for
renovated areas.
Location
Cause of Delay
Sulaymaniyah
27%
INLCE
8/18/2009
500 beds
The contractor is in the process of descoping the
construction of the 3-story, high-security building due to engineering problems encountered
with the design and site conditions. The number
of beds provided under this project is being
reduced from 1,000 beds to 500 beds.
Thi-Qar
74%
INCLE
8/2/2009
400 beds
Work stoppages.
Source: INL, response to SIGIR data call, 7/1/2009.
July 30, 2009 I REPORT TO CONGRESS I
65
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
HJC’s ability to provide for its own security, both
for infrastructure and personnel protection. INL
also reported these activities:187
• conducting security upgrade assessments for
five courthouses
• completing the last two courthouse security
upgrades (Phase I) in Mosul (Ninewa province) and Ba’quba (Diyala province)
• facilitating an agreement with the Director of
Training for the MOI to train 7,500 PSCs who
will protect the HJC judges nationwide
• presenting a vulnerability assessment of the
main terrorism court in Baghdad
Since June 17, 2003, 143 lives have been lost
in judicial assassination attempts—38 judges, 6
judicial family members, and 99 judicial employees, including security personnel. No judges,
employees, or security personnel were assassinated this quarter. However, on or about April
22, 2009, a judge in Kirkuk was kidnapped and
subsequently released.188 For a summary of assassinations among court workers, see Figure 2.22.
Major Crimes Task Force
The United States continues to work on building
the capacity of Iraq’s Major Crimes Task Force
(MCTF). Now 23 Iraqi investigators work under
the MCTF, drawn from MOI’s Internal Affairs,
the MOI Office of the Inspector General, the
National Information and Investigations Agency,
and MOI’s Criminal Investigation Division
(CID). U.S. participation also increased with the
addition of a third U.S. Army CID agent and a
second Defense Criminal Investigative Service
(DCIS) agent.
As of June 15, 2009, the MCTF had 49 open
investigations, had obtained 111 arrest warrants, conducted 11 arrests, and interviewed 69
witnesses/sources, among other activities. U.S.
66 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Figure 2.22
Assassinations of Iraqi Judges and Court Staff Since 2003
Diyala
Salah Al-Din
Baghdad
Tameem
Ninewa
Babylon
Basrah
Anbar
Wassit
Muthanna
Thi-Qar
Kerbala
Najaf
Qadissiya
Missan
0
5
10
15
20
25
30
Note: No data for the Kurdistan Region.
Sources: SIGIR, Quarterly Report to the United States Congress, 4/30/2009; U.S. Justice Attache-Baghdad,
response to SIGIR data call, 7/2/2009.
federal agents continued to mentor, train, and
advise the Iraqi investigators on the task force,
reporting three significant investigative accomplishments this quarter:189
• In April 2009, the MCTF investigators opened
an investigation into the attempted murder
of the Executive Secretary to the Minister of
Justice. The victim lost both legs in an explosion during the attack.
• In June 2009, the MCTF opened an investigation into the murder of a U.S. citizen who was
killed in the International Zone. This is the
first investigation of its kind being conducted
by the MCTF. It required 2 Iraqi search warrants, which resulted in the arrest of 5 U.S.
contractors and 1 Iraqi national, as well as
seizure of drugs, items used to manufacture
false Iraqi license plates and vehicle registration cards, and more than 50 weapons.
Detainee Release and
Court Docket Backlog
As of June 15, 2009, the total detainee population in MNF-I custody had dropped to 10,956 as
SECURITY
MNF-I continues working with the GOI to release detainees or transfer them to GOI custody
in accordance with the Security Agreement.
Since January 1, 2009, more than 3,682 detainees were released. The rate of detainee release
or turnover for Joint Task Force-134 Detention
Operation has averaged 750 per month.190 Of
those still detained by the Coalition, 2,325 have
been convicted or are at some stage of scheduling for trial in the Central Criminal Court of
Iraq (CCC-I).191
The U.S. government has taken multiple
steps to assist the HJC in mitigating the docket
backlog. In the short term, RoL advisors in
many provinces provide basic logistical assistance. MNF-I also provides logistical assistance
by transporting some detainees to court and
by transporting judges to regions of Iraq that
Table 2.16
Number of Detainees Affected by the Amnesty Law (2/2008–6/2009)
Appellate Court
Number Eligible
Number Denied
Baghdad-Rusafa
13,687
8,181
Baghdad-Kharkh
16,282
7,025
Ninewa
12,989
2,189
1,873
1,501
1,695
Diyala
Qadissiya
4,573
Missan
3,402
513
Basrah
9,989
1,587
Kerbala
7,339
579
Babylon
16,857
2,565
Wassit
6,515
912
Anbar
1,443
541
Muthanna
5,684
701
Thi-Qar
9,913
1,621
11,073
782
Tameem
7,450
1,225
Salah Al-Din
4,206
1,241
133,422
32,858
Najaf
Total
lack sufficient judicial personnel to adequately
process the high volume of additional cases often
resulting from security operations.
In coordination with PRT Baghdad, DoJ’s
Law and Order Task Force (LAOTF) continues
its work out of the Rusafa Legal Defense Center,
providing 25 Iraqi attorneys to assist thousands
of detainees with legal services—a measure
aimed at reducing judicial backlog. Since its
inception, the Rusafa Legal Defense Center has
conducted thousands of defense consultations.
There has been some positive GOI response to
this initiative, and similar activities are planned
in other provinces, particularly in Anbar and
Diyala. LAOTF has also provided technical assistance in establishing a basic system to help court
personnel more efficiently locate and transport
detainees for court hearings.
DoS and INL are also developing long-range
initiatives, such as the Iraq Higher Judicial
Council Court Administration Project, which
should allow the HJC to increase its capacity in
all aspects of judicial administration, including
case management. The HJC currently lacks a
centralized case management system, and often
there is little case tracking. The initiative aims to
standardize a national case-management system
initially via a manual system, and then gradually,
it plans to phase in a computerized system. JEDI
has established criminal case management as a
priority in its curriculum development.
Amnesty Law
As of June 2009, 133,422 Iraqis charged with
crimes were eligible for amnesty under a law
passed in February 2008; 32,858 were ineligible.192 For details, see Table 2.16.
Source: INL, response to SIGIR data call, 7/2/2009.
July 30, 2009 I REPORT TO CONGRESS I
67
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Court Reconstruction Update
This quarter, the $21.5 million Anbar Appeals
Courthouse construction and renovation
project (funded through the IRRF, ISFF, and
Iraq Interim Government Fund) was completed.
In addition to renovating three former palaces,
which serve as courthouses, the GRD-managed
project included the construction of housing
facilities for the justices and barracks for the
security guards.193
In May 2009, renovation of the Mosul Courthouse was completed. This $511,000 project was
funded by INL to provide a number of security
upgrades designed to protect both citizens and
Ministry of Justice employees.194
Anbar Appeals Courthouse set for the opening ceremony.
(GRD photo)
Court Operations Update
In April 2009, by order of Chief Justice Medhat,
the CCC-I Rusafa Trial Court was combined
with the District Felony Court, in Baghdad, and
renamed the Felony Court at the Rusafa Judicial Palace. The new court presides over felony
criminal trials in addition to terrorism cases.
Consistent with past practice, the U.S. government has provided significant logistical and
technical support to all CCC-I locations.
CCC-I Rusafa
LAOTF continues to provide logistical and
technical assistance to increase the efficiency
and security of the facility and reports the following milestones:
• Defense Bar Initiative: The Baghdad Legal Defense Center is now less dependent on LAOTF
mentoring and is developing GOI relationships
that will sustain it in the future. The Center
reports that it is improving and expanding
its reach to assist detainee cases as they move
through the system.
68 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
• Rusafa Prison. LAOTF established a full-time
liaison (Line of Operation, or LNO) to the Rusafa Prison to improve coordination between
the courts and the Iraqi Correctional Service
(ICS) and resolve issues delaying detainee releases. The LNO briefed the Minister of Justice
on approximately 1,000 Iraqi Army detainees
who have had no meaningful court action for
2 to 5 years. Most detainees held since 2003
and 2004 face serious criminal charges; however, their cases are being processed slowly,
and evidence gathering and basic concepts of
due process appear to be challenges. LAOTF
is pushing to have these cases either addressed
by the regular courts or through the process
provided for under the Amnesty Law.
• Joint Investigative Committee (JIC): The
LAOTF Investigative Judge (IJ) team coordinated with Coalition forces and the ISF to
obtain more than 600 warrants and over
100 detention orders against members of
SECURITY
Figure 2.23
Federal Cassation Court: Presented Cases vs.
Discharged Cases, 2004–2008
50,000
40,000
30,000
20,000
10,000
0
2004
2005
Presented Cases
2006
2007
2008
Discharged Cases
Note: The Federal Cassation Court is an appellate tribunal. A case is
considered “discharged” if a judge dismisses it or if a verdict is reached.
U.S.-funded renovation of the old Mosul Courthouse. (USACE photo)
al-Qaeda, Hezbollah, and others, pursuant to
the Security Agreement. The team established
the model operations with the JIC, which
comprises an Iraqi IJ and investigators who
work with joint Coalition and Iraqi military
units to investigate and refer terrorism cases to
the Iraqi CCC-I.
CCC-I Kharkh
Task Force-134 maintains a liaison office with
the CCC-I Kharkh to assist in the prosecution
of cases in which Coalition forces are victims
of criminal offenses or where Coalition forces
investigate serious crimes against Iraqi military
or civilian victims. The office coordinates the appearance of detainees and witnesses and assists
the Iraqi investigative officers in the collection
and presentation of evidence.
The Justice Attaché’s office within the
Embassy’s RoL Section continued to support
Source: GOI, Higher Judicial Council, “Annual Statistical Report of Iraqi
Court Cases of 2008,” 5/2009, p. 6.
CCC-I Kharkh as well, including providing advice and information to the judges. In
June 2009, the Justice Attaché and the Chief
Investigative Judge served as joint faculty for
search and seizure training of U.S and Iraqi law
enforcement officers.195
The Federal Court of Cassation completed
68% of the 9,564 cases received this quarter.
For a comparison with previous years, see
Figure 2.23.196
In 2008, 11,736 cases were heard by criminal
courts throughout Iraq. Of that number, 29% of
the cases were discharged (that is, dismissed or
completed), and 4% ended with the court finding
in favor of the defendant. The remaining cases
ended in other verdicts of conviction. In contrast,
the CCC-I, which adjudicates cases throughout
the greater Baghdad area, heard 5,820 cases in
2008. For the verdict results of those cases, see
Figure 2.24. ◆
July 30, 2009 I REPORT TO CONGRESS I
69
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.24
Court Cases Discharged in 2008
Nationwide Criminal Court Cases Discharged
Verdicts
Appealed
1,406
24%
43%
Other Verdicts
2,567
Central Criminal Court of Iraq Cases Discharged
Verdicts
Appealed
1,290
22%
24%
10%
Cases
Dismissed
1,717
Other Verdicts
1,371
Innocent Verdicts
561
29%
4%
Innocent Verdicts
231
Cases
Dismissed
2,598
45%
Note: “Verdicts Appealed” refers to those cases where a verdict was reached, but the case was referred to the Federal Court of
Cassation, which functions as an appellate tribunal. A case is considered “discharged” if a judge dismisses it or if a verdict is reached.
Source: GOI, Higher Judicial Council, “Annual Statistical Report of Iraqi Court Cases of 2008,” 5/2009, pp. 58 and 62.
70 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
INFRASTRUCTURE
INFRASTRUCTURE
THE STATE CANNOT CARRY
ALL THE BURDENS IT USED TO
CARRY. THE STATE NEEDS TO
TRANSFER MORE WORK AND
BURDENS TO THE PRIVATE
SECTOR AND ATTRACT
FOREIGN INVESTMENT. I
BELIEVE IF WE MOVE MORE
TOWARD PRIVATIZATION, WE
WILL SEE IMPROVEMENTS.197
—MINISTRY OF PLANNING
ALI BABAN, APRIL 2009
Since 2003, the United States has allocated
$11.88 billion for programs to rehabilitate Iraq’s
infrastructure, including projects in the energy,
water, and transportation and communications
sectors. Through June 30, 2009, $11.83 billion
had been obligated, and $11.45 billion had been
expended.198 For the status of U.S. infrastructure
spending, see Figure 2.25.
For an overview of the U.S. Embassy’s current
economic and infrastructure team, see Figure 2.26.
This quarter, as U.S. infrastructure projects continued closing out, several milestones were reached:
• Crude oil production averaged 2.40 million barrels per day (MBPD), up more than
5% from the previous quarter but 3% below
production during the same quarter in 2008.
Crude oil exports averaged 1.88 MBPD, a 3%
increase from last quarter and roughly equal
to exports during the same quarter last year.199
Figure 2.25
Infrastructure—Status of Funds
$ Billions
Change Over
Quarter
Year
5%
4%
$12.0
Allocated $11.88
$11.5
Obligated $11.83
4%
5%
$11.0
Expended $11.45
4%
11%
$10.5
$10.0
Q4
Q1
FY 2008
IRRF
CERP
ESF
Allocated
$10.06
$1.27
$0.54
Q2
Q3
FY 2009
Obligated
$10.06
$1.28
$0.49
Expended
$9.87
$1.10
$0.48
Note: Data not audited. Numbers affected by rounding.
• In its first contracting round for the development of oil and gas fields, the Ministry of
Oil accepted a bid from a consortium led by
British Petroleum to develop the Rumaila field,
Iraq’s largest oil field. The ministry rejected all
bids for the development of other fields.200
• The Qudas Power Plant expansion project—
the largest U.S. power-plant generation initiative in Iraq—was completed in May, adding
200 megawatts (MW) of feasible production
capacity to the national grid.201
• Total electricity supply reached a post-invasion
record high for the fourth straight quarter, a
7% increase from the previous quarter and a
35% increase over the same quarter in 2008.202
• Increased flow of water in the Tigris River led
to increased hydroelectric production.203
U.S. agencies now are focused on helping Iraq
maintain and sustain previously completed projects and on building Iraqi capacity to continue
infrastructure development.204
The GOI’s efforts to rebuild and improve its
infrastructure are hampered by limited available funding. The GOI’s 2009 budget contained
reductions in the capital budgets of several
key ministries, and the Ministry of Electricity
(MOE) reports that its efforts to increase production have been hindered by a lack of funding
necessary to procure new generation equipment.
Further, although the GOI has begun major
projects to improve water treatment, roads,
and oil production, much greater government
capacity and resources are needed to sustain the
development of Iraq’s infrastructure. To meet
these financial challenges:
Sources: GRD, responses to SIGIR data call, 7/4/2009 and 7/18/2009; MNC-I,
Quarterly Report, 7/4/2009; U.S. Embassy-Baghdad, response to SIGIR data call,
7/6/2009; SIGIR, Quarterly Report to the United States Congress, 4/2009.
July 30, 2009 I REPORT TO CONGRESS I
71
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
• The GOI received a $500 million loan from the
World Bank that will fund power, water, and
water treatment projects. This loan is in addition to the World Bank’s $1 billion allocation
in 2003.205
• On May 17, 2009, the Iraqi Council of Ministers approved the sale of $3 billion in dinardenominated treasury bonds to provide
$2.4 million in funding for electricity projects
and $600 million for water and railway projects. However, the measure has yet to receive
approval by the Council of Representatives
because of unresolved issues.206
Private investment has played only a minor
role in the reconstruction of Iraq, with the
transportation and telecommunications sectors
receiving the largest capital infusions.207 However, the latest oil and gas bidding round and
recent partnerships in the electricity sector may
signal increased GOI interest in foreign capital
investment.208 In the past, security concerns,
corruption, and a poor overall business environment have deterred needed capital flow into the
country.209 For more on foreign investment in
Iraq, see the Economy section in this Report.
Figure 2.26
U.S. Embassy Transition Assistance Organizational Chart
MNF-I Commanding General
Ambassador
Deputy Chief of Mission
Deputy Chief of Mission
(Transition Assistance)
(Primary)
Chief of Staff/ Special Advisor
Economic Coordinator
Operations, Maintenance
and Sustainment
ECON Counselor
ITAO (Vacant)
Energy
USAID
Foreign Agricultural Service
(USDA)
Acting Health
Foreign Commercial Service
(Commerce)
Transportation
Treasury
Source: U.S. Embassy-Baghdad, response to SIGIR data call, 7/16/2009.
Energy
Since 2003, the United States has allocated
$6.94 billion, obligated $6.89 billion, and expended $6.74 billion to refurbish and expand
Iraq’s energy sector (oil, gas, and electricity).210
Iraq is dependent on oil for its domestic
energy needs, as well as for government funding.
More than 90% of Iraq’s energy needs are met
with petroleum. Further, crude oil exports and
refining activity currently provide more than
85% of the GOI’s revenue.211 For more on oil
72 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
revenues and the Iraqi budget, see the Economy
section in this Report.
Oil and Gas
Through June 30, 2009, the United States had allocated $1.94 billion, obligated $1.92 billion, and
expended more than $1.91 billion to rehabilitate
Iraq’s oil and gas infrastructure.212
Although the United States does not have any
ongoing construction projects in the oil and gas
INFRASTRUCTURE
Figure 2.27
Crude Oil Production and Exports, by Month, 7/2003–6/2009
Million Barrels per Day
3.0
Production
2.5
2.0
1.5
1.0
Exports
0.5
0.0
2003
2004
2005
2006
2007
2008
2009
Sources: ITAO, Monthly Import, Production, and Export Spreadsheet, 1/2008; U.S. Embassy-Baghdad, response to SIGIR data call, 10/2/2008;
DoS, Iraq Status Report, 5/27/2009; NEA-I, response to SIGIR data call, 7/2/2009.
sector, capacity-development programs continue
for Ministry of Oil employees:
• The U.S. Department of Commerce conducted
workshops in its Commercial Law Development Program; the sessions centered on
contracts, licensing, and the economics of oil
field development.213
• The U.S. Department of the Interior’s Minerals Management Service conducted a four-day
course for Ministry of Oil employees on international regulation, lease and tender administration, and dispute mitigation.214
• USAID launched an initiative to modernize the information technology infrastructure at the Doura Refinery, which recently
increased fuel oil output by 77%. USAID has
trained Ministry of Oil employees in project
management, procurement, and contracting,
as well as health, safety, and environmental
systems management.215
The Ministry of Oil is focusing its efforts on
increasing oil production through new service
contracts with international oil companies.216
Oil Production and Exports
Crude oil production this quarter averaged 2.40
MBPD, up 5% from last quarter, but below the
post-invasion record of 2.48 MBPD set in the
second quarter of 2008. Exports of crude oil averaged 1.88 MBPD, up 3% from last quarter and
about the same as export levels during the same
quarter in 2008. However, exports were below
the post-invasion high of 1.94 MBPD set in the
fourth quarter of 2007.217
Refinery inputs this quarter averaged about
400,000 barrels per day. After exports and refinery
inputs, the remaining 120,000 barrels per day of
crude oil produced either was used as fuel in electric power plants or could not be accounted for.218
For crude oil production and export levels
since 2003, see Figure 2.27.
July 30, 2009 I REPORT TO CONGRESS I
73
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
GOI Efforts To Increase Production
The Ministry of Oil estimates that at least
$75 billion worth of investment will be necessary to achieve its goal of producing 6 MBPD
by 2017.219 If production levels were to reach 6
MBPD, Iraq could become the fourth-largest
oil-producing nation in the world.220 Attaining
this GOI goal depends on both technical and
political factors.221
The ministry aims to increase production
through new service contracts awarded in three
bidding rounds, the first auctions held since the
nationalization of the oil sector in 1972. The first
round, held on June 30, aimed at completing
contracts for six oil fields and two gas fields to
raise production by 1.8 MBPD by 2013. The bids
contained two components:222
• the amount per barrel that the ministry will
reimburse the contractor for production increases over baseline production
• the production level that will be reached and
sustained over a seven-year period
The ministry accepted just one of the bids and
is in the process of agreeing on a 20-year service
contract to develop the Rumaila field, which
contains an estimated 17 billion barrels of oil, or
15% of Iraq’s current proved reserves.223 This offer was subsequently approved by the Council of
Ministers.224 The ministry has announced that
production at Rumaila is expected to increase to
2.85 MBPD from its current output of slightly
less than 1.0 MBPD. The ministry rejected terms
offered by international oil companies for service contracts on the other fields.225
The second bidding round is scheduled to take
place in the second half of 2009. The ministry
plans to auction 10 oil fields in that round, with
the aim of increasing production an additional
2 MBPD by 2013. Round three is expected to
74 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
include tenders for the remaining discovered oil
fields in the country.226
Many challenges confront the Ministry of
Oil in its goal of increasing oil production and
exports. First, according to the Center for Global
Energy Studies, neither the ministry nor the GOI
have a strategic petroleum plan for the long-term
development of Iraq’s resources. Second, the
package of hydrocarbon laws remains stalled,227
and international firms remain guarded about
pursuing opportunities in Iraq. Third, production and exports face major bottlenecks, and the
Ministry of Oil has limited capacity in terms of
manpower, equipment, and services.228
The Minister of Oil, Husayn al-Shahristani,
was summoned before the Iraqi parliament to
answer questions about his leadership at the ministry and why oil production has not increased.229
New Oil Exports from the Kurdistan Region
On June 1, 2009, the Kurdistan Regional Government (KRG), in agreement with the GOI,230
began exporting oil from the Tawke and Taq Taq
fields. The Tawke field is connected to the IraqTurkey pipeline, and oil from the Taq Taq field
is being trucked to GOI facilities to be pumped
through the same line.231 Oil revenues are controlled by the Ministry of Finance, which pays
foreign oil companies for their work to develop
the fields and oversee production.232 However,
there is no agreement for any additional funds
above the 17% of total GOI revenues that the
KRG automatically receives.233
Pipeline Security
Because of repeated sabotage, protecting Iraq’s
energy infrastructure became an important priority for the United States early in the reconstruction
effort. Under the ESF-funded, GRD-executed Infrastructure Security Program, the United States
INFRASTRUCTURE
has constructed pipeline exclusion zones (PEZs)—
large berms, fencing, and other security measures
that block access to major oil pipelines.
No pipelines within the PEZ were attacked
this quarter. The Bai Hassan oil field’s pipeline, a
gas line to the Mosul power plant, and the Baiji
oil refinery were attacked this quarter, but there
were no effects on oil production or exports.234
This quarter, the Iraqi Navy assumed control
of point security from Coalition forces at the
Khawr al-Amaya Oil Terminal. Since 2004,
Coalition and Iraqi forces have jointly provided
security for Iraq’s oil platforms, and this transfer
is the first in a process of transitioning security
for Khawr al-Amaya and the Al Basrah Oil Terminal (ABOT) to the Iraqi Navy. Joint security
will continue at the ABOT. Nearly three-fourths
of Iraq’s oil is transferred to tankers for export
from these terminals.235
Figure 2.28
Refined Fuel Production and Imports,
by Month, 2006−2009
Refineries and Petroleum Products
Kerosene
GOI progress since 2003 in increasing refinery
production of gasoline, diesel, kerosene, and
liquefied petroleum gas (LPG) has resulted in far
fewer imports being required to meet domestic
consumption. Recent trends continued this
quarter: Iraq produced the majority of its total
supply of gasoline, kerosene, and diesel fuels,
but imported more LPG than it produced. This
quarter, Iraq imported 74% of its total supply of
LPG, 28% of its gasoline, 13% of its diesel fuel,
and none of its kerosene.236 For more on refined
fuels, see Figure 2.28.
LPG
Metric Tons per Day
8,000
6,000
Total Supply
4,000
Imports
Imports
2,000
0
Domestic
Domestic
Production
Production
2006
2007
Iraq has the world’s tenth-largest proved reserves
of natural gas,237 but it currently lacks the infrastructure to effectively use or export this energy
resource. About 40% of Iraq’s gas production
reportedly is flared.238
2009
Diesel Fuel
Million Liters per Day
24
18
Total Supply
12
Imports
Imports
Domestic
Domestic Production
Production
6
0
2006
2007
2008
2009
Million Liters per Day
12
Total Supply
9
6
Imports
Domestic
Domestic Production
Production
Imports
3
0
2006
2007
2008
2009
Gasoline
Million Liters per Day
20
Total Supply
15
10
Imports
Imports
Domestic
Domestic Production
Production
5
Natural Gas
2008
0
2006
2007
2008
2009
Note: Data for first three months of 2009 includes corrected data
received from NEA-I and differs from data shown in SIGIR’s April 2009
Quarterly Report.
Source: NEA-I, responses to SIGIR data call, 1/5/2009 and 7/2/2009.
July 30, 2009 I REPORT TO CONGRESS I
75
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.29
Average Iraqi Electricity Production, Imports, and Total Supply, by Month, 7/2006–6/2009
MWh per Day
160,000
140,000
Total Electricity Supply
120,000
100,000
Imports
80,000
60,000
40,000
Production
20,000
0
2006
2007
2008
2009
Source: ITAO/EFC, Electric Daily Performance Reports, 7/1/2006–6/30/2009.
The KRG has expressed interest in exporting
natural gas via the Nabucco Pipeline as a part
of an $8 billion project, but the GOI has rejected
any deals to unilaterally export gas from the
Kurdistan Region.239 However, the GOI had once
denied the KRG the right to export oil and later
acquiesced under a compromise.240 The $11 billion project is designed to build a 3,700-kilometer (km) pipeline to supply Europe with natural
gas from Central Asia and the Middle East. The
56-inch pipeline reportedly has the capacity to
carry 31 billion cubic meters per year of natural
gas from eastern Turkey to Austria.241
Electricity
Since 2003, the United States has allocated $5.00
billion, obligated $4.97 billion, and expended
$4.84 billion242 to help Iraq improve its generation, transmission, and distribution of electricity,
as well as to train MOE personnel in operations
and maintenance.243
76 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Generation Capacity, Production, and Imports
Iraq has continued a fairly steady climb in
electricity production and supply, setting new
post-invasion records during each of the last
four quarters. Daily electricity production from
April 1, 2009, to June 30, 2009, averaged 124,713
megawatt-hours (MWh), and imports averaged
16,327 MWh for a total supply of 141,040 MWh,
or 5,877 MW. This is a 7% increase from the
previous quarter and a 36% increase from the
second quarter of 2008—and almost 50% above
the level in the first quarter of 2007.244 Total
electricity supply over the past three years is
shown in Figure 2.29, broken down by domestic
production and imports.
Iraq’s feasible generation capacity averaged
10,722 MW this quarter, a 5% increase from
the previous quarter. Feasible capacity is the
maximum output from power plants taking into
account the condition of the plant. This quarter, Iraq’s power plants operated at 48% of their
INFRASTRUCTURE
Figure 2.30
Electricity Supply, by Source, Selected Quarters
MW
6,000
5,000
4,000
3,000
2,000
1,000
0
2007 Q2
2008 Q2
2009 Q1
2009 Q2
Imports
Hydro
Diesel
Combustion Turbine
Thermal
Source: ITAO/EFC, Electric Daily Performance Reports, 4/1/2007–6/30/2009.
feasible capacity, a figure unchanged from
last quarter and up from 40% in the second
quarter of 2008.245
The growth in electricity supply over the
past few years can be attributed primarily
to the refurbishment and construction of
combustion turbine power plants (see Figure
2.30). U.S. investments in generating capacity have focused on these types of power
plants. However, even with the addition of
new capacity at the Qudas plant in Baghdad,
production from combustion turbine plants
remained flat in the first and second quarters
of 2009. The roughly 400-MW increase in
supply this quarter came almost completely
from electricity imports and greater output
from hydroelectric plants.246
As shown in Figure 2.31, over the past
three quarters, Iraq has been steadily increasing the amount of electricity it imports.
Electricity imports this quarter increased by
one-fourth over last quarter and accounted
Figure 2.31
Electricity Imports, by Month, 7/2006–6/2009
MWh per Day
20,000
15,000
Total Imports
10,000
Imports from Iran
5,000
Imports from Turkey
0
2006
2007
2008
2009
Source: ITAO/EFC, Electric Daily Performance Reports, 6/1/2006–6/30/2009.
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.32
Estimated Electricity Demand and Load Served, 7/2007–6/2009
MWh per Day
250,000
200,000
Estimated
Demand
150,000
Load Served
100,000
50,000
2007
2008
2009
Source: ITAO/EFC, Electric Daily Performance Reports, 7/1/2007–6/30/2009.
for almost 12% of total supply on the grid, compared with 9% in the same quarter last year.247
Hydroelectric production almost doubled
from last quarter,248 with virtually all the additional output coming from the Mosul dam on
the Tigris River.249 The higher output may be attributed to three factors: actions by Turkey that
temporarily increased the flow of river water to
downstream countries, mildly increased rainfall, and a brief break in the regional drought.250
Relative to average production in the first quarter of 2009, hydroelectric production increased
64% in April and 142% in May before dropping
back to roughly the April level in June—reflecting the vagaries of hydroelectric plants.251 The
water held behind dams is primarily for irrigation and potable water. Electricity generation is
a byproduct of the water-control systems, and
reduced output of electricity from these plants
often reflects efforts to conserve water.252
Efforts To Increase Capacity and Production
Even with new combustion turbines coming on line and supply increasing, Iraq is still
78 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Table 2.17
Ongoing GRD Electricity Projects
Project Type
Generation
Number of Projects
Cost ($ millions)
5
$202.7
Transmission
7
$143.1
Distribution
3
$4.6
15
$350.4
Total
Source: GRD, Monthly SITREP, 4/2009, slide 3.
unable to meet the demand for electricity.
ITAO estimates that the available electricity
supply meets less than three-fourths of demand.253 Figure 2.32 shows estimated demand
and load served over the past two years.
GRD has completed 457 projects, valued at
more than $2.12 billion, to increase electricity
generation, transmission, and distribution.254
For details on ongoing electricity projects, see
Table 2.17.
The Qudas Power Plant Expansion was
completed this quarter. This $176 million project
was the largest power plant expansion overseen
INFRASTRUCTURE
to the grid sometime between September and
December. Additional projects are planned to
further increase electricity production capacity
in Iraq.256 However, the MOE requested $1 billion for short-term contracts, but received only
$400 million. This forced a hold on projects to lay
new electric cables and upgrade power switches
necessary for increasing production.257
The GOI has signed a new contract to increase
the capacity of solar production across the
country. The contract includes terms for a full
production line of solar panels that can generate
up to 250 watts of electricity each. Production is
expected to start in November 2009.258
Transmission and Distribution
SIGIR’s audit of the Muhalla 312 electricity expansion found that the contractor fulfilled
project specifications.
by GRD and the final power generation project
to be funded from the IRRF. Two Iraqi firms
designed and installed two new turbines that
operate on either crude oil or diesel fuel, adding
200 MW, or 2% of feasible production capacity, to the national grid. During the height of
construction, 400 local workers were employed
on the project. ITAO provided program management, and GRD supervised the contract and
construction of the project. The MOE has assumed responsibility for daily operations.255
The GOI has signed contracts with foreign
firms to increase domestic electricity production
capacity. The World Bank and the MOE
are funding a project to bring two new
200-MW generators to the Hartha thermal
plant. Four new generation units are currently
being installed at a power plant in Amara that
will add an additional 200 MW to the grid.
Another four projects with Siemens and other
foreign firms are expected to bring 600 MW
As Iraq adds new generation capacity over the
next three to five years, the transmission and distribution systems will need substantial upgrades
to operate with acceptable reliability. Although
the transmission system is generally adequate for
current loads, it apparently is strained in some
areas—most notably in the north, including the
Kurdistan Region, where the transmission system is relatively weak for the amount of electricity that flows through it from the power plants
to the substations. Upgrades to local distribution
systems, which carry power from the substations to end users, also are needed to keep up
with increased electrical generation and to share
the available power more equitably. Inadequate
funding for these upgrades could cause both
technical and political problems.259
In Thi-Qar province, GRD recently finished
a $24 million project designed to bring more
stability to the electricity network. Phase I of
the project installed a $14.8 million overhead
transmission line linking the Nassriya power
plant and the al-Shatra substation. In phase II,
GRD completed a $9.2 million upgrade to the
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
substation and power plant, providing power for
500,000 people as far away as Basrah.260
GRD also recently turned over five 132kilovolt IRRF-funded substations to the MOE
in the Basrah area. The projects were valued at
more than $48 million.261 The added grid stability allows these substations to serve 275,000
residents, local industries, the port of Khor AlZubair, and nearby oil facilities.262 GRD is also
overseeing the construction of a $3.4 million
ESF-funded Electrical Engineering College at
Kufa University.263
This quarter, SIGIR performed an audit of the
CERP-funded Muhalla 312 Electrical Distribution Project. Though the project took longer to
complete than anticipated, the $11.76 million
initiative was successful in meeting the goal of
rehabilitating an electrical distribution facility
and thereby providing electrical power to 12,000
people in a 10-square-block Baghdad neighborhood. The contract was managed and overseen by
GRD effectively, and coordination with the GOI
was excellent, resulting in transfer to the MOE on
January 13, 2009. SIGIR’s May 20, 2009, visit confirmed that the GOI was sustaining the project,
something SIGIR has noted was often persistently
lacking in previous projects. The only problem
noted is that the project was not fully coordinated
with other U.S. reconstruction activities—a
previous SIGIR recommendation related to other
reconstruction activities.264
Water
The United States has allocated $2.61 billion,
obligated $2.61 billion, and expended $2.46
billion265 to expand access to potable water and
increase sewage treatment in Iraq. Since 2004,
GRD has completed 382 water projects, and 30
80 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
remain ongoing.266 These projects include the
construction of large-scale water distribution
systems, compact-unit water treatment plants,
new irrigation systems, and the rehabilitation of
existing infrastructure.267
Iraq’s potable water and irrigation supplies, as
well as hydroelectric power production, depend
largely on limited annual rainfall and the flow of
water in the Tigris and Euphrates rivers, which
originate in the mountains of Turkey.268 The
Deputy Minister of Water Resources noted that
only 32% of Iraq’s water is locally sourced.269 In
the second quarter of 2009, water stored behind
the Haditha Dam was only 17% of the dam’s
capacity.270 The overall water volume for the year
will likely remain below average; the Haditha
Dam will not be able to fulfill water requirements because of reduced flow from upstream
sources in Turkey.271
Iraq’s recovery from severe drought hinges
on increased supply from its neighbors to the
north.272 A May 2009 meeting between Turkey’s government and the GOI resulted in an
increase of the flow of water along the Euphrates. The Ministry of Water Resources (MoWR)
has requested further increases.273 Reflecting
the seriousness of the situation, the Iraqi Parliament passed a bill stipulating that all future
agreements with Turkey or Syria include Iraq’s
demand for an equitable share of resources.274
The MoWR is responsible for supplying
untreated water for Iraq and oversees 7 dams,
18 barrages, hundreds of pump stations, 140
reclamation projects, and more than 80,000
kilometers of irrigation and drainage channels.
The MoWR is working to rehabilitate equipment
and pump stations that were poorly maintained
over the last 30 years and to preserve and restore
the Mesopotamian marshes, 90% of which were
destroyed by the former regime.275
INFRASTRUCTURE
Irrigation
Water Treatment
Agriculture is the largest source of private-sector
employment in Iraq,276 and irrigation is vital to
sustaining the industry. More than 90% of Iraq’s
water supply is used to irrigate more than 3.25
million hectares of farmland.277
GRD has completed six projects, valued at
approximately $127 million, to repair dams and
canals to improve both irrigation and drainage.
Five projects remain ongoing at a cost of nearly
$65 million.278
The MoWR has undertaken an almost
$1 million project to improve irrigation for
orchards in Ninewa and Dahuk. The project
includes seven canals spanning more than
five miles to carry water from nearby springs
and mountains to the farming areas, as well as
an aqueduct and rainwater discharge system.
These irrigation canals will replace the earth
canals that were previously carrying water to the
farms.279 In Anbar province, the MoWR is constructing concrete canals to improve irrigation
efficiency and reduce water losses as part of the
Saqlawiya Reclamation Project.280
U.S.-funded projects valued at $1.37 billion281
have added the capacity to produce 2.5 million
cubic meters of potable water per day, which
potentially could serve approximately 8 million people. U.S. construction projects have also
added 1.2 million cubic meters per day of sewage treatment capacity, which has the potential
to serve approximately 5 million Iraqis. To
reach their potential, these projects must have
a consistent supply of electricity and a reliable
staff to operate them, conditions which are often
not met.282 According to a June 2009 UN report,
only 12% of Iraqi households have a reliable
water connection.283
On April 22, 2009, GRD marked the completion of the Choman Water Project, which was
funded with $1 million from the ESF and $1.2
million from the Erbil governor’s office. Choman
is located near a mountain range with heavy
annual snowfall and plentiful water, but there
had not previously been a method for getting the
water to the town. GRD engineers helped design
an 11-mile network of gravity-fed pipes to funnel
Table 2.18
Ongoing GRD Water Supply Projects
% Complete
Project Name
Cost ($ millions)
(% scheduled complete)
Significance/Issues
Halabjai Shaheed Water
Project
$1.1
34% (61%)
The project is designed to provide water for
an isolated town; safety issues continue at
work site.
Al-Jehad Water Compact
Unit
$1.0
68% (68%)
The project is designed to provide clean
water for 300,000 local residents; shortage of
qualified personnel has impeded progress.
Sadr City Potable Water
Networks
$3.0
89% (100%)
Al-Abu Shemsi Water
Compact Unit
$1.2
39% (33%)
The project is designed to serve 368,000
people in Sadr City.
The network is designed to serve 1,000 local
residences in the city.
Note: Numbers affected by rounding.
Sources: GRD, Weekly SITREP, 6/9/2009, slide 12; GRD, Weekly SITREP, 6/9/2009, slide 32; GRD, Weekly SITREP, 4/10/2009, slide 17; GRD,
Weekly SITREP, 6/9/2009, slide 28.
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
this source into the town’s water network. The
system has no mechanical parts, thus requiring
little maintenance.284
GRD is also assisting in the expansion of the
Qurmat Ali Water Facility. The $9.5 million
project will quadruple the facility’s capacity
to 16,000 cubic meters per hour. Throughout
Basrah’s neighborhoods, 2.5 million people will
receive water from the facility, which is only
10 km away. Previously, these citizens relied on
the Sweetwater canal pump station, which is
90 kilometers north of the city.285 For more on
ongoing GRD water projects, see Table 2.18.
The budget shortfall has led to GOI cuts in
potable water and sewage treatment projects.
The mayor of Baghdad reportedly said that
Iraqi municipalities were initially allocated $5
billion, but those funds were cut by 60%, forcing
cancellations for potable water and wastewater
treatment projects.286
Transportation and
Communications
As of June 30, 2009, the United States has
allocated $1.08 billion, obligated $1.08 billion,
and expended $1.00 billion to improve Iraq’s
transportation and communications systems.287
Roads and Bridges
GRD continues work on road and bridge
construction projects throughout Iraq. For an
overview of completed and ongoing projects, as
well as those not yet started, see Figure 2.33.
This quarter, the $1.3 million ESF-funded
al-Khiarat Road project was completed in Kerbala province. The existing surface, measuring only six meters across, was replaced with
a wider road to improve traffic flow. The $1.2
82 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
SIGIR’s inspection of the Mujarrah Canal Bridge found some faulty construction, but overall the
work met most design specifications.
million I-CERP-funded repair of the Hai alSalam Bridge near Baghdad is now 54% complete. This bridge will reconnect two Baghdad
communities once complete. In Salah Al-Din
province, the $7.1 million al-Shirqat Bridge is
now 75% complete. This IRRF-funded project
consists of a multi-span, two-lane concrete
bridge, as well as four kilometers of roadway
approach to the bridge. This project has encountered the challenges of relocating electricity sources for bridge lighting, erosion control,
and delays in contractor payments because of
slow GOI administration.288
This quarter SIGIR issued an inspection
report on the Mujarrah Canal Bridge in Anbar
province, a significant link in the transportation
network of western Iraq connecting Ramadi to
Falluja, and ultimately to Baghdad. The Mujarrah Canal Bridge, which was severely damaged
by a vehicle-borne improvised explosive device,
INFRASTRUCTURE
Figure 2.33
GRD Road and Bridge Projects
$ Millions
Ongoing Road and
Bridge Projects
Bridge Project
Road Project
Completed Road Projects,
Dollars Spent per Province
Completed Bridge Projects,
Dollars Spent per Province
Baghdad
$30 M
Anbar
$17 M
$0 - $5
$0 - $0.5
$5 - $10
$0.5 - $1
$10 to $20
$1 to $5
over $20
over $5
Status of Road Project Funds
$0
$30
$60
$90
Status of Bridge Project Funds
$120
$150
$0
CERP
CERP
IRRF
IRRF
ESF
ESF
I-CERP
I-CERP
DFI
DFI
$5
$10
$15
$20
Completed
Ongoing
FUND
Not Started
Source: GRD, response to SIGIR data call, 7/6/2009.
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
was contracted to be repaired to its original
condition for $1.3 million from the CERP. The
inspection revealed several construction issues,
but the overall construction carried out by the
contractor met with most of the design specifications. SIGIR recommended an investigation
by GRD engineers into the construction deficiencies, which they ultimately performed. The
bridge was supposed to be completed by October
2008, and it opened this past June.289
Table 2.19
Average Number of Monthly Train Movements
Type of Rail Service
Passenger
Freight
10/2006–3/2007
10/2008–3/2009
18
135
236
663
Source: U.S. Embassy-Baghdad, response to SIGIR data call, 7/6/2009.
Railroads
Over the last two years, passenger and freight
traffic on the Iraqi railroad system has increased
with the decline of insurgent activity. As of June
30, 2009, 62% of the 1,412-mile system was in
use, and ridership stood at 14,400 passengers
per month. Notwithstanding this rise in rail
usage, much of the existing infrastructure must
be rehabilitated, and the Kirkuk line has not yet
reopened since the destruction of the Al-Fatah
Bridge. Design work for repair of the structure
is underway, but the Iraq Republic Railway has
not received a sufficient capital budget to meet its
needs.290 For more on the increase in ridership
and freight movement, see Table 2.19.
SIGIR’s inspection of the $2.7 million IRRF-funded Roll-On/Roll-Off Berth in the Port of Umm Qasr
found only minor construction deficiencies.
Ports
Iraq has six seaport facilities in Basrah province,
with the Port of Umm Qasr being the main
deep-water facility. Umm Qasr has 22 platforms,
175,000 square feet of covered warehouses, and
800,000 square feet of storage facilities. More
land around the port is available for future expansions. A ferry transports passengers, vehicles,
and cargo between Umm Qasr and Dubai three
times each week.291
To rehabilitate the port’s capacity to import
and export goods, the United States has undertaken construction projects in ship removal, sea
84 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
lane dredging, crane and loading berth repair,
electrical improvements, and upgrading port
security. Recently, repair work to loading cranes
at Umm Qasr entered its third and final phase,
which will involve $900,000 of work from the
IRRF. Also, average monthly shipping traffic
in the port has increased by 47%, which has
resulted in a 20% revenue increase.292
GRD is currently overseeing a $44.4 million
GOI foreign military sales (FMS) contract to
construct a pier and seawall at Umm Qasr. The
stakeholders of this project include the Ministry
INFRASTRUCTURE
SIGIR’s audit of the Baghdad International Airport Caravan Hotel raised concerns about project selection, cost oversight, and
transfer to the GOI.
of Defense and the Iraqi Navy Operational
Squadron, which requires facilities for its
15 patrol boats, 4 patrol ships, and 2 off-shore
support vessels.293 The final site plan incorporates
a floating pier, a seawall, electrical connectivity,
and water and fuel distribution systems for the
docked ships.294
This quarter, SIGIR released an inspection
report on one of the U.S. projects designed to
increase the operational capability of the Port of
Umm Qasr. The project, a $2.7 million IRRFfunded Roll-On/Roll-Off Berth, was designed
to ease the loading and unloading of freight at
the port. SIGIR concluded that the construction of the berth was adequate and that it was
operating at the design capacity specified in the
contract. Minor damages were noted during
the site inspection, and at SIGIR’s request, the
Transportation Attaché of the U.S. Embassy took
immediate action in consulting the Ministry of
Transportation (MOT) to repair the damage.
The project increased local employment and the
port’s capacity for docking vessels.295
The port of Abu Flus provides facilities on
the Shatt Al-Arab waterway, specializing in the
export of cars, electrical and agricultural products, and construction materials. To reach its
full capacity, this facility will require additional
funding. The port of al-Maqal has been closed
for 20 years. More than $7 million has been
invested to refurbish the port, but more funding
will be needed to re-open the facility.296
Aviation
Air traffic operations in Iraq have risen significantly over the past two quarters. Aircraft
operations (arrivals, departures, and overflights)
increased 44% from the fourth quarter of 2008
to the first quarter of 2009, the latest period for
which data is available. Moreover, from the first
quarter of 2008 to the first quarter of 2009, aircraft
operations have more than doubled. As of June 30,
2009, approximately 63% of flights in Iraq were
civilian carrier flights, and 37% were military.297
The GOI’s Iraqi Civil Aviation Authority
(ICAA) now oversees the country’s airports
under the required standards of the International Civil Aviation Organization and has
little continuing dependence on U.S. contractors to maintain these standards. Under the
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Security Agreement, Iraq assumed control
of all of its airspace on January 1, 2009, but
has requested U.S. support for airspace below
24,000 feet. However, on July 1, 2009, under
an agreement with the United States, Iraq
took over responsibility for funding contracts
to train air traffic controllers. As the number
of qualified Iraqi controllers increases, the
GOI will assume increasing control over more
of its airspace. In addition, the Council of
Ministers has approved an MOT plan for an
additional $8 million in contracts for radar
automation and communication, surveillance
and navigation technicians, and aeronautical
information services.
The United States and UN continue to aid
Iraq in its goal of achieving full compliance
with ICAO standards by 2011. The Federal
Aviation Administration performed audits of
five of six major Iraqi airports and provided
the ICAA with the reports so the deficiencies could be corrected. The UN Development
Programme produced a Civil Aviation Master
Plan, which will aid the ICAA in achieving full
compliance.298 The plan includes 243 recommendations in the areas of civil aviation legislation, aviation security, airport security, aviation
safety, and air transport economics.299
This quarter, SIGIR performed an audit of
a $4.2 million CERP project to build a hotel at
Baghdad International Airport as part of the
development of the economic zone around the
airport. Although the Baghdad International
Airport Caravan Hotel project was completed
according to specifications, questions remain
about the project’s selection, cost, oversight, hotel management contract, and the lack of plans
for transfer to the GOI. For example, available
documentation did not answer questions as to
why the project was completed six months late,
86 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
why the project cost increased from $2.7 million
to $4.2 million during the solicitation process,
or why the contract was modified to require
cash payments after initially making payments
by electronic fund transfer. These internal control weaknesses make the program vulnerable to
undetected fraud, waste, and abuse. Moreover,
although the hotel is operating, it has not been
transferred because of doubts regarding whether
the GOI would sustain it. MNC-I entered into
a contract with a hotel management contractor,
which, in effect, put MNC-I in competition with
private-sector businesses. Further, MNC-I has
not identified legal authority for entering into
such an arrangement.300
Telecommunications
The largest U.S. project in the telecommunications sector, the Al Mamoon Telecommunications Center, has been stalled since November
2008 because of contracting issues. GRD reports
that the project will be re-awarded in the third
quarter of 2009.301
Ministry of Communications Update
The Ministry of Communications (MOC)
contains Iraq’s two state-owned telecommunications companies—the Iraqi Telecommunications and Postal Company (ITPC) and the State
Company for Internet Services. The ITPC has a
monopoly on providing copper lines and claims
a monopoly on providing fiber-optic lines, but
this claim is disputed by private competitors.
Iraq’s fiber-optic network has reasonable capacity, but occasional breaks in service have led the
World Bank and Japanese government to aid the
ITPC in improving the network. The ITPC also
is working to improve the “last mile”—the connection of end users to the network—which remains a weak link in Iraq’s telecommunications
INFRASTRUCTURE
network. Improvements are expected to be
complete by the end of 2010.302
Iraq’s independent regulator of the telecommunications industry, the Communications
Media Commission (CMC), has been inactive
since April 2008 because neither the chairman
nor the nine commissioners have been present.
Also, new legislation may further hinder independent regulation and free-market competition.
This new legislation will move the powers of the
CMC into the MOC and begin crowding out the
private competition in the sector. Private investment remains central to having competitive
pricing and improving the cellular and Internet
networks. The MOC prefers to exert control
over pricing and services across the telecommunications market. Further, penalties have been
assessed against three cellular providers for poor
service; these penalties may not be justified.303
The United States continues to support
telecommunications legislation that backs
free-market competition and an independent
regulator, as well as training for MOC and CMC
employees, the appointment of all CMC commissioners, and GOI participation in telecommunications forums.304
Phone and Internet Service
There are 1.2 million landline telephone service
users, a figure that has been consistent for one
year.305 In April 2005, landline telephone service
surpassed the pre-2003 level of 880,000 users.306
There were 17.7 million mobile telephone users
in the second quarter of 2009—unchanged from
last quarter. The U.S. Embassy reports that there
are now 830,000 subscribers to the Internet, a
slight increase from last quarter.307
Progress in the wireless service sector is an
example of the role private investment can play
in Iraq’s economic development. In 2003, market
penetration in the wireless sector was only 3% of
the market, but now more than 65% of the population is served, with most of the growth coming
from the private sector. Three firms serve nearly
18 million subscribers in Iraq:308
• Zain-Iraq—9.7 million
• Asiacell—6.1 million
• Korek—1.9 million
Zain Telecom was fined $18.6 million for
poor service this quarter, but the company cites
Coalition forces jamming operations as having
interfered with its ability to provide wireless service.309 Notwithstanding the volatile regulatory
environment, service remains affordable and
accessible; a typical subscriber pays less than $20
per month.310 ◆
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
GOVERNANCE
Since the beginning of U.S.-led operations,
the prevailing wisdom among U.S. and Iraqi
policy makers concerning Iraq’s governance and
reconstruction has often been challenged, reassessed, and changed. The political environment
in Iraq—compounded by ethnic, religious, and
sectarian strife—has necessitated these periodic
reevaluations. From the first leaders of the Coalition Provisional Authority and the Iraqi Governing Council to the current Prime Minister and
U.S. Ambassador, the focal point for action has
always been, and continues to be, the principals
occupying these positions. For a timeline of key
U.S. and GOI diplomatic and military leaders
and their tenures, see Figure 2.34.
With the advent of the Security Agreement and the subsequent reduction of the U.S.
footprint in Iraq, the emphasis of U.S. policy has
increasingly shifted away from brick-and-mortar
reconstruction projects to programs focused on
training, institution building, and humanitarian
assistance. The goal of these programs is to increase the capacity of Iraqi institutions to govern
effectively, provide reliable public services, and
strengthen economic development.
Since 2003, the United States has allocated
approximately $7 billion for governance activities in Iraq.311 For the status of these funds, see
Figure 2.35.
This quarter, audits prepared by the Government Accountability Office (GAO) and USAID’s
Office of Inspector General (USAID OIG) examined some of the major U.S.-funded capacity-development programs operating in Iraq. Some of
the key deficiencies cited by these audits included
poor management controls and an inability to
secure Iraqi commitment to program goals. The
audits also noted certain successes, but focused
on identifying areas for improvement in the following initiatives:
• DoS’s Provincial Reconstruction Development
Council (PRDC) program
• USAID’s National Capacity Development
(NCD) program
• USAID’s Economic Governance II (EG II)
program
• USAID’s Local Governance program–Phase II
(LGP II)
BUT I DO HAVE AN UNYIELDING BELIEF THAT ALL PEOPLE
YEARN FOR CERTAIN THINGS:
THE ABILITY TO SPEAK YOUR
MIND AND HAVE A SAY IN
HOW YOU ARE GOVERNED;
CONFIDENCE IN THE RULE
OF LAW AND THE EQUAL
ADMINISTRATION OF JUSTICE;
GOVERNMENT THAT IS
TRANSPARENT AND DOESN’T
STEAL FROM THE PEOPLE; THE
FREEDOM TO LIVE AS YOU
CHOOSE. THESE ARE NOT JUST
AMERICAN IDEAS; THEY ARE
HUMAN RIGHTS. AND THAT IS
WHY WE WILL SUPPORT THEM
EVERYWHERE.312
– PRESIDENT BARACK
OBAMA, U.S. EMBASSY
BAGHDAD, JUNE 4, 2009
Figure 2.34
Governance Timeline
March 2003
Operation Iraqi Freedom begins
April 2003
Baghdad falls
CPA created
LTG Ricardo Sanchez
AMB L. Paul Bremer, III
Iraqi Governing Council
Coalition Provisional Authority (CPA)
2003
June 2004
Iraqi Sovereignty
October 2005
Constitution of
Iraq adopted via
referendum
December 2005
National Elections
March 2006
First Meeting of Council
of Representatives
GEN George W. Casey, Jr.
January 2009
Provincial Elections
GEN David Petraeus
AMB John Negroponte
AMB Zalmay Khalilzad
PM Ayad Allawi
PM Ibrahim al-Jaafari
Iraqi Interim Government
September 2007
GEN Petraeus and
AMB Crocker
report to Congress
on situation in Iraq
2005
Permanent Government of Iraq
2006
2007
Sources: SIGIR, Hard Lessons: The Iraq Reconstruction Experience, 2/2009; SIGIR, Quarterly Reports to the United States Congress, 3/2004-4/2009.
88 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
AMB Christopher Hill
PM Nouri al-Maliki
Iraqi Transitional Government
2004
GEN Ray Odierno
AMB Ryan Crocker
2008
2009
GOVERNANCE
Figure 2.35
Governance—Status of Funds
$ Billions
$7.0
Allocated $7.01
Obligated $6.77
$6.5
Change Over
Quarter
Year
11%
1%
15%
$6.0
Expended $5.80
$5.5
3%
21%
$5.0
$4.5
Q4
Q1
IRRF
ESF
CERP
Q2
Q3
FY 2009
FY 2008
Allocated
$3.48
$2.73
$0.80
Obligated
$3.48
$2.49
$0.80
Expended
$3.30
$1.86
$0.64
Note: Data not audited. Numbers affected by rounding.
Sources: ITAO, Essential Indicators Report, 5/14/2009; U.S. Embassy-Baghdad, response
to SIGIR data call, 7/6/2009; GRD, response to SIGIR data call, 7/4/2009; USAID, response
to SIGIR data call, 4/13/2009; DoS, response to SIGIR data call, 4/5/2007.
Figure 2.36
U.S. Embassy Governance Programs Organizational Chart
MNF-I Commanding General
Ambassador
Deputy Chief of Mission
Deputy Chief of Mission
( Transition Assistance)
(Primary)
Capacity Development
Political
Anti-Corruption
Provincial Affairs
Governance
Middle East Regional Office
Civil Society
USAID
U.S. governance assistance also comes in the
form of advisory and capacity-development
support for Iraq’s anticorruption institutions. In
2004, the Coalition Provisional Authority (CPA)
created the Commission on Public Integrity
(now known as the Commission on Integrity, or
COI), established Iraq’s inspector-general system,
and reestablished the independence of the Board
of Supreme Audit. Since then, U.S. advisors have
worked with their Iraqi counterparts to provide
resources and training to increase the capacity of
these independent oversight entities.
In 2008, the United States created an ambassadorial position within the U.S. Embassy in Baghdad, the Anticorruption Coordinator, to oversee
these programs. Notwithstanding these efforts
and recent positive statements made by senior
GOI officials, endemic corruption continues to
pervade Iraq’s governmental institutions.313
For an organizational chart of U.S. Embassy
offices that deal with governance programs and
issues, see Figure 2.36.
Constitutional
& Legislation
The United States continues to support Iraqi
governance at the local, provincial, and national
levels through focused capacity-development
programs, funded primarily by the Economic
Support Fund (ESF) for Iraq. For an overview of
ongoing ESF-funded programs, see Figure 2.37.
The Ministerial Capacity
Development Program
Refugees
and IDPs
National
Capabilities and
Resource Office
Legal
Regional Affairs
Consular
The Ministerial Capacity Development (MCD)
program assists key ministries and the inspectors
general in developing the technical skills necessary to effectively deliver public services. This
initiative focuses on the Ministries of Finance,
Source: U.S. Embassy-Baghdad, response to SIGIR data call, 7/16/2009.
JULY 30, 2009 I REPORT TO CONGRESS I
89
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.37
ESF Support for Ongoing Governance Programs
$ Millions
$0
$100
$200
$300
$400
$500
$600
$700
Community
Stabilization Program
PRT/PRDC Projects
Local Governance
Program
Community Action
Program
National Capacity
Development
Democracy and Civil
Society
PRT Quick Response
Fund
Total Obligated
Total Expended
Note: Data not audited. Numbers affected by rounding.
Sources: U.S. Embassy-Baghdad, responses to SIGIR data call, 7/6/2009 and 7/16/2009; GRD, response to SIGIR data call, 7/4/2009; ITAO, Essential Indicators
Report, 5/14/2009; SIGIR, Quarterly Report to the United States Congress, 4/2009.
Electricity, Oil, Municipalities and Public Works,
Water Resources, Planning, Justice, Agriculture,
and Health.314
MCD activities comprise two main elements:
dedicated advisors who provide direct technical
support to the ministries, and training for Iraqi
civil servants at the national and provincial levels
to improve their approach to public administration functions. For example, the MCD program
funds the Legislative Coordination Committee Program (LCCP) and Council of Ministers
Secretariat (CoMSec) Organization Review and
Document Management System.315 The LCCP
provides senior lawyers to assist the Prime Minister’s office and trains junior lawyers to become
effective civil servants. Program goals include
the creation of a digital library and a legislative
90 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
tracking system. In early 2007, the contract to
implement these systems was awarded to a Jordanian firm, which provides Iraqi legal advisors
to the Prime Minister’s office and scans the Iraqi
Official Gazette (roughly Iraq’s equivalent to the
U.S. Statutes at Large) to create a centrally accessible electronic record.316
The CoMSec Organization Review and Document Management System provides a foundation
for long-term capacity development in support of
the Joint Campaign Plan, which guides the overall U.S. mission in Iraq. To ensure greater transparency and effectiveness, the U.S. government
agreed to provide CoMSec, the administrative
heart of the GOI, with an Electronic Document
Management System (EDMS). This MCD project
provides for an organizational assessment and a
GOVERNANCE
change-management program designed to create
standardized CoMSec policies and procedures.317
CoMSec is expected to begin rolling out the
EDMS in late fall 2009.318
Provincial Reconstruction
Development Committees
Through the PRDC program, DoS and the U.S.
Army Corps of Engineers (USACE) work with
Iraqis to develop proposals and implement smallscale projects throughout the country.319 Projects
in the water and wastewater, electrical, transportation, communications, education, and medical
sectors have brought basic services to thousands
of Iraqis, improving their standard of living.320
From November 2006 through February 2008,
the PRDC program received $700 million from
the ESF.321
According to the June 2009 GAO audit, however, the PRDC program suffers from multiple
“management control weaknesses.” The program
was designed around a seven-step process that
includes proposal development by Iraqi officials,
approval by a U.S. Embassy team, and implementation by USACE. Until May 2009, though,
DoS lacked a program manager with general
oversight responsibilities to identify deficiencies
and implement solutions. The audit also pointed
to the lack of a performance-monitoring system
to check program outcomes against the PRDC
initiative’s stated goals. Moreover, GAO found
that DoS did not adequately communicate frequent changes in program policies and guidelines to its USACE partners.322
National Capacity Development
The National Capacity Development (NCD)
program, or “Tatweer,” is a USAID initiative that
trains Iraqi government employees in critical
skills to bolster their administrative, budgetary,
and planning capabilities. The program supports national and regional training centers and
ministerial training programs throughout Iraq.323
It also works with 10 GOI offices to improve
their overall institutional performance and
introduce international best practices. According
to USAID, the NCD program has trained more
than 70,000 GOI officials in strategic planning,
human resources, financial management, and
project management over the last 2 years.324 The
program began in August 2006, is scheduled to
run through January 2011, and has an allocated
budget of approximately $339.5 million, of which
$299.3 million has been obligated and $198.8 million has been expended through June 2009.325
In addition to the GOI ministries, the NCD
program also works with the National Center
for Consultancy and Management Development
and GOI’s “Executive Offices,” which include:
the Presidency Council, Prime Minister’s office,
Deputy Prime Minister’s office, CoMSec, Prime
Minister’s Advisory Committee, National Investment Commission, and Labor Ministry’s Social
Safety Net.326
In 2009, the NCD program has increased its
provincial efforts, and on May 5, NCD and the
Deputy Prime Minister’s office co-sponsored the
first Provincial Assistance Conference in Baghdad. The conference was attended by almost 500
participants, including an Iraqi Deputy Prime
Minister, the U.S. Ambassador, the USAID
Mission Director, and other U.S. government
representatives. NCD’s provincial assistance
plans were presented at the conference, which
provided participants an opportunity to reach
consensus on improving basic services delivery
and capacity building in the provinces of Anbar,
Diyala, Kerbala, Najaf, and Wassit. Subsequent
conferences will focus on other regions.327 This
quarter, according to USAID, 4,738 enrollees
JULY 30, 2009 I REPORT TO CONGRESS I
91
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
completed 232 courses, bringing the cumulative total trained to 66,658. Participants from
provinces outside Baghdad accounted for 79% of
all those trained in May 2009, and GOI trainers
delivered 56% of courses.328
In its June 2009 audit, GAO found that
although the NCD program has a clearly
defined organizational structure and proper
management controls, it has financial control
weaknesses for contract payment. According to
the audit, $17 million of $79 million in invoices
did not have a confirmed receipt for goods and
services. GAO also noted that USAID did not
adequately document reviews of contractors’
invoices before paying them.329
Economic Governance II
USAID’s EG II program assists the GOI in
creating policies, programs, and institutions that
promote transparency and encourage economic
growth and investment in Iraq. In September
2004, USAID awarded a $223 million contract to
BearingPoint to implement the program’s goals
for providing advisory and training services
to aid Iraq’s development of a modern regulatory and social safety-net framework.330 USAID
claims several programmatic accomplishments—
pension reforms, monetary policy tools, and
designing and training officials on an automated
financial management information system.331
However, according to USAID OIG, the EG II
program has not had a significant impact on
Iraq’s economic environment. After 4 years and
$192 million in incurred costs, less than half of
EG II’s original 398 tasks had been accomplished,
including the implementation of the Iraq Financial Management Information System (IFMIS).332
The IFMIS has suffered setbacks since its
implementation began, including the May 2007
abduction of five EG II contractors assigned
92 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
NCD/Tatweer Capacity Development Training in Baghdad. (OPA photo)
to work on the project.333 The bodies of two of
those kidnapped contractors were discovered in
late June 2009.334 USAID noted in its comments
on the audit that, because of security concerns
following the kidnappings, it has been hampered
in its ability to verify onsite the outcomes of the
contract and has used alternate methods of confirmation. For more information on the status of
EG II and the IFMIS, see the Economy section of
this Report.
Local Governance Program
USAID’s LGP initiative supports Iraq’s transition
to self-reliance by strengthening GOI institutions at the provincial, municipal, district, and
sub-district levels. Since the program’s inception,
Research Triangle Institute (RTI) International
has been awarded all three phases of the contract
(LGP I, LGP II, and LGP III).
SIGIR audited the cost, outcomes, and
oversight of USAID’s LGP contract with RTI
GOVERNANCE
International in October 2008. At that time,
SIGIR found that costs from LGP I and LGP
II ($609 million total) were not easily linked to
outcomes, citing insufficient program oversight
by USAID. However, SIGIR noted that contract
management and oversight had gradually improved over time.335
On May 31, 2009, USAID OIG released an
audit report of LGP II, finding that the program
had only been “partially successful in strengthening Iraq’s emerging and fragile local governance system” and concluding that the program
needed oversight of training courses for GOI
officials—a key component of the contract.336
The audit’s recommendations are expected to be
implemented under the LGP III contract ($125.5
million337), which began on January 1, 2009.338
According to USAID, LGP III is currently on or
ahead of schedule based on the task order’s scope
and approved plan.339
Anticorruption
The GOI continues to work on a more comprehensive anticorruption strategy to replace a 2008
plan, but although the Council of Representatives
(CoR) has prepared a draft anticorruption law, it
is unclear when it may pass. Moreover, prospects
for passage of multiple bills to reform Iraq’s principal anticorruption agencies remain in question.
In June 2009, the GOI formally announced
that it was launching a campaign against bribery
in the ministries.340 Moreover, the Commission on Integrity (COI) reported approximately
997 arrest warrants issued against GOI officials
suspected of corruption since 2004—53 at the
director-general level or above. A COI statement
noted that 51 government employees were arrested in April, and 69 were arrested in May.341
On May 16–17, 2009, the CoR questioned
Minister of Trade Abdul Falah al-Sudani on corruption allegations, including graft and nepotism. Al-Sudani, a member of the Prime Minister’s Dawa Party, later resigned his post and was
arrested. As of June 28, al-Sudani was free on
bail and awaiting trial.342 Following the arrest,
Prime Minister al-Maliki was quoted as saying,
“We will not remain silent over corruption after
today. We will pursue those corrupt and bring
them to justice.”343
UNCAC Compliance
U.S. agencies continue to support Iraq’s efforts to
establish an effective anticorruption regime compliant with the UN Convention Against Corruption (UNCAC). To that end, USAID maintains
a training program for inspectors general and
their staff. The Department of Justice also trains
COI personnel under the DoS/INL-funded
International Criminal Investigative Training
Assistance Program (ICITAP), and the U.S.
Embassy’s Anticorruption Coordination Office
(ACCO) continues to fund programs implemented by the UN Development Programme
(UNDP) and the UN Office on Drugs and Crime
(UNODC).344 This quarter, the United States
conducted several anticorruption activities in
support of these efforts:345
• In April, the ACCO funded the UNDP-sponsored “UNCAC Self-assessment Conference”
in Amman, Jordan. Representatives from Iraq’s
anticorruption agencies attended and redrafted
an analysis of the gap between the GOI’s current level of anticorruption preparedness and
the UNCAC’s requirements. In June, a U.S.funded follow-up meeting was held.
• Also in June 2009, the ACCO funded a UNODC
conference on anti-money-laundering
legislation.
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
• The University of Utah, under an ACCOfunded program, provided the CoR with an
analysis of Article 136(b) of the Iraqi Criminal
Procedure Code to assist the GOI in reforming
this controversial provision that allows ministers to effectively immunize their subordinates
from prosecution. The Utah program also reviews and drafts anticorruption laws to ensure
they meet UNCAC obligations.
• ICITAP signed over INL-funded polygraph
and surveillance equipment to the COI to
increase its enforcement capabilities.
• The Embassy’s Public Affairs Section provided
technical assistance to COI’s Education Department, and the military produced year-long
public service announcements on anticorruption issues.
In addition to these activities, the ACCO is
currently developing a program to assist the
COI’s legal staff and another 12-month initiative
aimed at providing investigative and management training to Iraq’s IGs. Neither of these
programs has been funded yet. The ACCO also
requested a number of CERP projects focused
on supporting the COI’s provincial field offices. These projects would focus on improving
government services that have been negatively
affected by corruption.346 For the ACCO’s organization chart, see Figure 2.38.
Other U.S. Anticorruption Initiatives
This quarter, USAID’s NCD program held a
senior leadership anticorruption seminar under
the auspices of one of Iraq’s two vice presidents.
The NCD program also hosted its first Trainthe-Trainers course for local participants from
the offices of inspectors general and the President’s Council.347
Iraq’s Association of Inspectors General
(AIG) also accepted the recommendation of
NCD advisors to integrate the anticorruption courses currently taught at the Karrada/
Tatweer compound to assist in building training capacity at the AIG Academy. Further, the
NCD anticorruption team has been asked to
Figure 2.38
U.S. Embassy Anticorruption Coordination Office Organizational Chart
Coordinator
Deputy
Executive Assistant
Senior Consultant
Commission on
Integrity
Senior Consultant
Inspectors
General/
Board of Supreme
Audit
Source: DoS, response to SIGIR data call, 7/10/2009.
94 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Project Manager
Senior Consultant
Cultural Advisor
GOVERNANCE
work on monitoring the flow of oil and improving the complex web of transfer payments,
rations, and subsidies that comprise Iraq’s
social safety net.348
Elections Overview
On March 26, 2009, the Independent High
Electoral Commission (IHEC) released official provincial election results. This began the
process of Provincial Council formation in the
14 provinces where elections were conducted in
January 2009. This process includes selection of
provincial governors and their deputies. In the
central provinces, large majorities or pluralities
won, making it easier for alliances to be forged.
Consequently, senior posts were filled quickly
in these provinces. In some southern provinces,
however, the vote was divided among many
parties, making it more difficult for the newly
elected council members to reach a consensus
on leadership positions. Muthanna was the last
to form its Provincial Council, selecting a new
governor on April 30, 2009.349
Under IHEC guidance, the Kurdistan Region
completed a successful and peaceful first week
of updating voter registration in preparation
for regional parliamentary and presidential
elections, which are scheduled for July 25, 2009.
Throughout the Kurdistan Region and in Baghdad, 89 voter registration update centers opened
on May 25, 2009. The IHEC reported that 1,109
observers and 650 political party representatives visited the 89 centers to ensure proper
procedures were being followed.350 A date has
not been set for provincial elections in Tameem,
home to the ethnically mixed and violenceplagued city of Kirkuk.351
The USAID-funded International Foundation
for Electoral Systems (IFES), which in conjunction with UNAMI forms the International Electoral Assistance Team (IEAT), has an embedded
team in the IHEC to assist the Iraqis in preparing
systems, procedures, and regulations for upcoming rounds of balloting in July 2009 and January 2010. For elections in the Kurdistan Region,
USAID assisted IHEC with the voter registration
process and the seat-allocation system. Given
the relative security of the Kurdistan Region,
the IHEC has made no request for large-scale
security assistance. Multi-National Force-Iraq
(MNF-I) is supporting IHEC efforts to train Governorate Electoral Office (GEO) security managers on contingency planning for the Kurdistan
Regional Government (KRG). But for July 2009,
MNF-I’s election support will be limited to intelligence, surveillance, and reconnaissance support
for ballot material movements, as well as medical
evacuation, with supporting quick-reaction forces
on standby.352
Several DoS Bureau of Democracy, Human
Rights, and Labor grantees are working to ensure
adequate voter education in advance of elections in the Kurdistan Region. The Institute for
War and Peace Reporting (IWPR) is conducting
election coverage workshops and, in cooperation with local partners, is developing radio
and TV programming to inform the electorate
about certain election topics. The International
Republican Institute (IRI) is working with local
civil society partners to produce and distribute
voter education materials. American University
and the International Research and Exchanges
Board are conducting public outreach programs.
Both IRI and the National Democratic Institute
are assisting a broad range of registered political
entities with their get-out-the-vote capabilities.353
JULY 30, 2009 I REPORT TO CONGRESS I
95
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Legislation
On April 19, 2009, Ayad al-Samarrai was elected
as the new Speaker of Parliament of Iraq’s CoR.
Al-Samarrai, deputy leader of Vice-President
al-Hashimi’s Iraqi Islamic Party, has introduced
a program to accelerate the passage of pending legislation and enhance the parliament’s
oversight role. Chief among the CoR’s outstanding agenda items is the work of the committee
considering Article 23 of the Provincial Elections
Law to develop an inter-communal, powersharing formula ahead of the provincial elections
in Tameem.354 Legislative activities this quarter
included:
• NGO Law. The CoR held a first reading on a
law regulating the operations and funding of
non-governmental organizations (NGOs).
• Amendment Law. To attract more foreign
investors to enter the Iraqi market, the CoM
approved a bill legalizing foreign ownership of
Iraqi land for investment in housing construction projects.
• Oil and Gas Laws. On June 1, 2009, low-level
talks were held concerning the recently initiated export of small amounts of crude oil from
two fields in the Kurdistan Region, but no
progress has been made on the laws. The U.S.
Embassy does not anticipate a political compromise on the management of oil and revenue
sharing before national elections in 2010.355
• Article 41. The Constitutional Review Committee is considering Article 41, which deals
with the issue of religious freedom, specifically
the personal status of Iraqis as members of
their respective religions and sects.356
• Article 140. In April, the UN Secretary
General’s Special Representative Staffan de
Mistura presented reports on disputed internal
boundaries in northern Iraq (the subject of
96 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Article 140) to the Prime Minister, the Presidency Council, and the KRG. The UN has not
released these reports to the public.357
• Article 115. The CoR’s Constitutional Review
Committee is also working with international
legal NGOs to clarify Articles 115 of the Constitution, which permits one or more provinces
to form a “region” with the ability to craft laws
that often give greater powers to the provinces
over the federal government.358
USAID’s Iraq Legislative Strengthening Program is attempting to enhance the committee
process in Iraq’s parliament, including helping to
establish oversight systems to monitor the implementation of laws passed by the parliament.359
On June 24, 2009, the KRG Parliament passed
a new constitution which claims Kirkuk as part of
the Kurdistan Region. However, the constitution
will not be ratified until the people of the Kurdistan Region vote for it via a referendum,360 which
was postponed and has yet to be rescheduled.361
In response, 50 members of Iraq’s CoR signed
a petition criticizing KRG’s new constitution as
incompatible with Iraq’s federal constitution.362
Refugees and IDPs
The UN High Commissioner for Refugees
(UNHCR) reports that approximately 12,600
internally displaced persons (IDPs) and refugees
returned home in April (see Figure 2.39). Since
January, the UN reports that more than 44,400
have returned. UNHCR and the International
Organization for Migration (IOM) estimate that
more than 1.5 million Iraqis remain displaced
in the region, and more than 1.6 million have
been displaced inside Iraq since the spike in
sectarian violence in February 2006. UNHCR
GOVERNANCE
also continues to seek donor contributions for
its $299 million appeal for Iraq and the region.
As of May 2009, only 47% of UNHCR’s appeal
had been funded.363 The UNHCR budget for the
Iraq supplementary program has increased from
$40 million in 2005 to more than $271 million
in 2008.364
In FY 2008, the DoS Bureau of Population,
Refugees and Migration contributed $287 million to international organizations and NGOs to
assist displaced Iraqis inside the country and in
the region.365 By the end of this quarter, it plans
to fund several initiatives to benefit displaced
Iraqis, which include:366
• $20 million for protection and shelter rehabilitation in areas to which refugees and IDP are
returning
• $15 million to UNHCR’s appeal for Iraq and
the region, in addition to a $90 million contribution made earlier this year
• $6 million contribution to International Committee of the Red Cross, in addition to
$21 million provided earlier this year
• $10 million to IOM for socioeconomic reintegration of returnees
To date, USAID’s Office of Foreign Disaster
Assistance has provided more than $105 million
in humanitarian assistance to Iraq. These programs prioritize assistance to vulnerable IDPs,
returnees, and host communities. Implementing
partners provide primary health care, emergency
relief commodities, protection services, temporary shelter, and employment support.367
Since FY 2007, 28,460 Iraqi refugees have been
admitted for U.S. resettlement, and by the end of
FY 2009 the United States seeks to admit at least
17,000 Iraqi refugees.368 So far, 13,030 refugees
have been resettled in the United States in FY
2009—ahead of the previous years’ pace.369 The
majority of resettled Iraqi refugees have been
processed from third countries—especially
Jordan and Syria—and 1,027 have been resettled
from the in-country refugee processing program
in Baghdad.370
Security concerns have caused significant
delays in processing Iraqis seeking visas for the
United States. As of June 25, 2009, 5,162 approved Iraqi refugees were awaiting clearance,
959 of which are processing from the in-country
Baghdad refugee program. Before March 31,
2009, 641 Special Immigrant Visas (SIVs) had
been issued to principal Iraqi applicants, and the
Embassy’s Consular Section issued an additional
362 visas from March 31 to June 14, 2009. As of
March 2009, 819 SIVs had been issued to Iraqis
who were principal applicants under the Section
1059 program,371 which provides special immigrant status to Iraqi translators and interpreters
who have served the U.S. Mission.
According to MNF-I, the Ministry of Displacement and Migration (MODM) plans to
expand its assistance programs for IDPs and
returnees. MODM Director General of Humanitarian Affairs, Samir al Nahi, claimed that the
Prime Minister’s office promised to supplement
the Ministry’s humanitarian assistance budget
with an additional $120.5 million—$26.5 million
in unspent funds from 2007 and $94 million in
new money.372
The MODM reports that it has streamlined
the returnee process by removing a requirement
that returnees register with local authorities
before registering with the ministry—reducing
average processing times by two-thirds. This
quarter, the MODM concluded a two-month
program for unregistered IDPs choosing to
return to their place of origin to register and
receive government stipends. In addition, the
ministry plans to conduct a survey of Iraq’s
JULY 30, 2009 I REPORT TO CONGRESS I
97
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.39
Number of Internally Displaced Persons, by Province
Dahuk
Erbil
Ninewa
Tameem
Sulaymaniyah
Salah Al-Din
Diyala
Baghdad
Anbar
Wassit
Kerbala
Babylon
Qadissiya
Missan
Thi-Qar
Najaf
Basrah
Muthanna
0-250 IDPs per 10,000 people
250-500 IDPs per 10,000 people
500-750 IDPs per 10,000 people
750+ IDPs per 10,000 people
Sources: U.S. Embassy–Baghdad, responses to SIGIR data call, 3/29/2009 and 7/6/2009.
98 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
GOVERNANCE
IDPs to determine their needs and assess their
intent to return. Those who do not intend to
return home would receive a $400 stipend
from the MODM to support their integration
elsewhere, and their status would no longer be
recorded as displaced.373
In July 2009, the MOH requested additional
funding for maintenance and repair of existing
primary health care facilities in Iraq. An original
project to build 150 Primary Healthcare Centers
(PHCs) resulted in the completion of only 133
facilities. Problems with security, construction,
and lack of progress on the remaining PHCs
resulted in an “as is” turnover to the GOI, descoping, or de-programming. An assessment is
planned to determine the extent of work needed
to bring these facilities on-line.375
construction on the 2-story, 160,000-square-foot,
94-bed acute and referral care center is ongoing.
USAID was responsible for construction, while
Project HOPE was responsible for providing
medical equipment and training for Iraqi doctors
and nurses. In June 2006, a “stop work” order
was issued to the contractor—Bechtel—and the
U.S. Embassy transferred oversight to the Gulf
Region Division (GRD) of the U.S. Army Corps
of Engineers. A new contract was awarded on
September 30, 2006, with a new finish date of
July 21, 2008. Since then 8 modifications and
22 additional contracts for support work have
been issued. Current estimates for the hospital to
be fully functional are 2011.376
Moreover, SIGIR inspectors found that
although the contractors’ design and quality
control plans were sufficient as executed, they
are expected to fall short of the proposed “stateof-the-art” hospital originally envisioned with
respect to medical equipment and its operation.
Unrealistic timeframes for design and construction, poor soil conditions, a drastically changing
security situation, multiple partners and funding
sources, and failure of the GOI to follow through
on its obligations all have contributed to escalating the project’s costs and delaying the opening.
The United States has funded $103.9 million in
construction for this complex through the IRRF,
Child Survivor and Health Programs Fund, and
CERP fund. The Government of Spain, Project
Hope, and the GOI have contributed an additional $61.8 million.377
Basrah Children’s Hospital
Missan Surgical Hospital
This quarter, SIGIR issued an inspection report
on Basrah Children’s Hospital (BCH), a pediatric
specialty hospital in southern Iraq. The BCH
project began on July 1, 2004, with a projected
completion date of December 2005. To date,
SIGIR also inspected the Missan Surgical Hospital,
a facility that was originally planned as a “stateof-the-art” surgical hospital and medical training
facility in Amara. The hospital’s construction
is funded with $12.7 million in ESF funds. The
Health Care
The Department of Health and Human Services,
through the Health Attaché’s office in the U.S.
Embassy, offers technical assistance to Iraq’s
Ministry of Health (MOH) in rebuilding Iraq’s
medical infrastructure. The Attaché’s Strategic
Plan for 2009–2010 outlines these priorities:374
• enhancing the quality and quantity of medical,
nursing, and mental health professionals
• implementing the Field Epidemiology and
Laboratory Training Program
• strengthening health infrastructure
JULY 30, 2009 I REPORT TO CONGRESS I
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
inspection revealed that the construction of the
hospital was significantly behind schedule. Phase
I of construction was to be completed on March
24, 2009, and Phase II on September 7, 2009;
however, SIGIR estimated that each phase was
approximately 10%-15% complete.378
SIGIR found that construction deficiencies
and deviations from specifications in the design
drawings, as well as slow progress by the contractor, have delayed the hospital’s opening. Furthermore, the GOI, which is responsible for providing equipment and staff to operate and maintain
the hospital, does not have the funds available to
facilitate these requirements. Until these assets
are in place, the hospital will serve no purpose.
SIGIR recommended that GRD’s Commanding
General resolve the construction deficiencies
and that the Iraq Transition Assistance Office
continues its efforts to coordinate with GOI officials to ensure that the project will be equipped,
staffed, and funded to maintain operations once
construction is completed.379
Human Rights
According to the DoS May 2009 Advancing
Freedom and Democracy Reports, conditions in
Iraq have improved following improvements
to Iraq’s security forces. However, while extrajudicial killings by government agents have
decreased sharply, discrimination and abuse
against women and minorities continue. In
addition, notwithstanding the GOI’s respect for
constitutionally protected religious freedom,
radical Islamic and criminal elements continue
to target religious minorities.380 For example, on
July 12, 2009, at least four people were killed and
dozens injured, including children, in bombings
at churches in Baghdad and Mosul.381 Trafficking
100 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
A cancer treatment ward, Basrah Children’s Hospital.
in persons for sexual exploitation and forced
labor were also reported as serious problems.382
U.S. support for human rights initiatives
focuses on the documentation, prevention,
and rehabilitation of victims of human rights
abuses. Partnering with NGOs, the U.S. government assists the Ministry of Human Rights
in gathering and analyzing data on human
rights abuses using complex DNA techniques.
U.S. training programs on parliamentary, legal,
and journalistic subject areas also support
rehabilitative services for victims of human
rights violations.383
On June 16, 2009, Jawad al-Bulani, Iraq’s Minister of Interior, announced that 43 police officers
will face charges following an investigation into
allegations concerning the abuse of prisoners. A
special MOI investigative committee found
23 instances of abuse and 20 cases of incarceration without warrant.384
Prime Minister al-Maliki formed a committee
to launch an investigation of conditions in Iraq’s
GOVERNANCE
prisons. The committee includes representatives
from the GOI security ministries as well as human rights and judicial agencies. Concerns over
prisoner rights have increased as the U.S. military continues to turn over custody of thousands
of detainees under the Security Agreement. The
UN has also warned of overcrowding and serious
violations of the human rights of detainees in
Iraqi custody. In addition, Harith al-Ubeidi, head
of the Sunni Iraqi Accordance Front and deputy
chair of the CoR’s human rights committee, was
assassinated June 12, 2009, after raising the issue
in the CoR.385
In June 10, 2009 letter to Prime Minister
al-Maliki, the Committee to Protect Journalists (CPJ) and the Baghdad-based Journalistic
Freedoms Observatory raised their concerns
over cases of assault and harassment of journalists by GOI officials. CPJ names Iraq as the most
dangerous country to conduct journalism; 139
reporters have been killed there since 2003.386
International Efforts
After almost two years in Iraq, the Special Representative of the UN Secretary General, Staffan
de Mistura, completed his tour this quarter; the
UN has named al-Melkert as his successor.387
On June 30, 2009, the GOI opened a consulate in
Detroit, Michigan, home of the largest ArabAmerican community in the United States.
At its opening, the consulate joined other Iraqi
missions around the world by hosting a Sovereignty Day event.
Also this quarter, several foreign dignitaries
visited Iraq, and several significant events occurred on the diplomatic front:388
• In April, the President of the Palestinian Authority visited Iraq, the first visit of a Palestinian leader since 2003.
• In May, Sheikha Mozah Bint Nasser alMissned, wife of the Emir of Qatar, visited
Iraq, as did the Belgium Foreign Minister.
• In June, Sweden officially re-opened its embassy in Baghdad. Following a visit to Baghdad
from its Foreign Minister, Norway announced
its plans to open a new embassy in Baghdad.
• The Egyptian Foreign Ministry recently announced that it will be sending a new ambassador to Iraq. The previous Egpytian ambassador to Iraq was killed by al-Qaeda in 2005.
• In June, the Yemeni Foreign Ministry nominated an ambassador to Iraq. ◆
JULY 30, 2009 I REPORT TO CONGRESS I
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
ECONOMY
Despite the worldwide financial downturn, Iraq’s
economy in 2009 is growing, although at a much
slower pace than in 2008. The UN’s mid-2009
update on the world economy named Iraq as
one of only seven countries that would experience economic growth of 3% or more this year.389
Growth in Iraq is largely dependent on oil
exports, which account for approximately twothirds of the country’s gross domestic product
(GDP) and 85%–90% of the government’s revenues.390 In addition, Iraq is much less integrated
into the worldwide economy than neighboring
oil-exporting countries, and its financial institutions have much less exposure to global “toxic”
assets.391 Continued growth, however, depends
on Iraq’s ability to attract needed foreign investment; to refurbish, expand, and protect its
energy infrastructure; and to sustain levels of
oil production and exports commensurate with
growth.392 The GOI also recognizes that a more
diversified economy will increase Iraq’s potential
for sustainable, long-term development.393
In recognition of the importance of growth
and job creation to stability in Iraq, the United
States has allocated approximately $1.46 billion, obligated approximately $1.46 billion, and
expended approximately $1.28 billion to support
and strengthen Iraq’s economic development, as
of June 30, 2009. For the status of U.S. funds to
support economic governance and private sector
development in Iraq, see Figure 2.40.
Gross Domestic Product
Estimates for positive GDP growth in Iraq vary,
but all are based on the assumption that oil
prices will continue to rebound in 2009 from
the early low of $35.60 per barrel.394 The International Monetary Fund (IMF) estimates that
Iraq’s real GDP will grow by 6.9% in 2009, compared with 9.8% in 2008.395 The UN estimates
more modest growth of 6.3% this year,396 and
the Economist Intelligence Unit forecasts 5.4%
growth in 2009.397
Real GDP growth, however, could fall to the
3% range if Iraq fails to boost oil exports beyond
current levels or to improve the performance of
its non-oil sectors.398 Oil-exporting nations this
year are operating in the larger environment of a
global economic slowdown, which has decreased
the worldwide demand for oil—a major factor
WITHOUT ECONOMIC PROGRESS, WE CANNOT KEEP THE
PEACE IN IRAQ ... SECURITY
AND ECONOMIC DEVELOPMENT MUST HAVE EQUAL
AMOUNTS OF INTEREST.399
—IRAQI PRIME MINISTER
NOURI AL-MALIKI,
APRIL 30, 2009
Figure 2.40
Economy—Status of Funds
$ Billions
$1.5
Allocated $1.46
Obligated $1.46
$1.4
$1.3
Expended $1.28
$1.2
$1.1
$1.0
$0.9
Q4
Q1
FY 2008
IRRF
ESF
CERP
Allocated
$0.97
$0.32
$0.17
Q2
Q3
FY 2009
Obligated
$0.97
$0.32
$0.17
Expended
$0.93
$0.22
$0.13
Note: Data not audited. Numbers affected by rounding.
Sources: MNC-I, Quarterly Report, 7/4/2009; U.S. Embassy-Baghdad, response to SIGIR
data call, 7/6/2009; ITAO, Essential Indicators Report, 5/14/2009; Treasury, response to
SIGIR data call, 4/2/2009; USTDA, responses to SIGIR data call, 4/2/2009 and 4/13/2009.
102 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
Change Over
Quarter
Year
7%
0%
11%
1%
12%
ECONOMY
Figure 2.41
Relationship of GOI Oil Revenues to Iraqi GDP
$ Billions
$100
$80
$60
GDP
Oil Revenue
$40
$20
$0
2005
2006
2007
2008
Note: IMF-estimated data for 2005–2006; IMF-projected data for 2007–2008. Oil revenue includes crude oil exports and domestic refinery activities.
Sources: IMF, “Country Report No. 08/303,” 9/2008, pp. 17, 19; IMF, “Country Report No. 08/383,” 12/2008, pp. 19, 21.
Figure 2.42
Inflation and Core Inflation Rates
% Change over Previous Quarter
20%
Quarterly Inflation Rate
15%
10%
Quarterly Core Inflation Rate
5%
0%
-5%
2004
2005
2006
2007
2008
2009
Note: Numbers affected by rounding. Iraqi consumer price index comprises: rent, miscellaneous commodities and services, medical services and medicine,
communication and transportation, fuel and light, furniture, fabrics and clothes, drink and cigarettes, and food stuffs. Core inflation index excludes: fuel
and light, as well as transportation and communications. June 2009 inflation data unavailable for 2nd quarter calculation.
Source: CBI, Key Financial Indicators, 6/25/2009, www.cbi.iq, accessed 6/29/2009; COSIT, Indices Numbers for Consumer Prices,
www.cosit.gov.iq/English/indices.php, accessed 7/23/2009.
in the decelerating economic growth in all oilexporting nations in the Middle East, including
Iraq.400 Figure 2.41 shows the direct relationship
between oil revenues and GDP growth in Iraq.
Inflation and Exchange Rates
Inflation in Iraq remains low, but volatile, with
commodities having the biggest impact on
price levels.401 U.S. Embassy-Baghdad has observed that the May 2009 decision by the GOI
to support local farmers by limiting vegetable
imports has yet to have any significant effect
on food prices. The Embassy reports that the
measure is being loosely enforced. Food prices
represent approximately 63% of Iraq’s consumption basket, which is an inflation-measuring tool that represents the combination
of goods and services consumed by a typical
Iraqi family.402 Figure 2.42 shows the recent
quarterly trend for inflation and core inflation
(which excludes fuel, electricity, communications, and transportation).
JULY 30, 2009 I REPORT TO CONGRESS I
103
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.43
Exchange Rate for the Iraqi Dinar, 2004–2009
Iraqi Dinar per U.S. Dollar, Daily Average
1,500
Iraqi Dinar per U.S. Dollar
1,250
1,000
750
500
250
0
2004
2005
2006
2007
2008
2009
Source: CBI, Key Financial Indicators, 7/1/2009, www.cbi.iq, accessed 7/5/2009.
The Central Bank of Iraq has helped keep
inflation low by allowing the dinar to appreciate
against the U.S. dollar, increasing Iraqi purchasing power.403 Figure 2.43 shows the current
exchange rates for the Iraqi dinar.
Unemployment
Iraq remains a predominantly state-controlled
economy in which the government is the nation’s largest single employer.404 Agriculture
is the nation’s largest private-sector employer,
accounting for approximately 25% of all jobs.405
As discussed in previous SIGIR reports, employment in Iraq is difficult to measure accurately.
Estimates of employment in the private-sector
economy, especially in the informal economy,
are sporadic and largely anecdotal. Reports from
the Iraq Transition Assistance Office and others,
however, suggest that recent security gains have
fostered increases in community-based, smallbusiness activity.406
According to Iraq’s Central Organization for
Statistics and Information Technology (COSIT),
the employment situation in Iraq has recently
104 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
shown a short-term positive trend. COSIT
estimates that national unemployment in Iraq
fell from 18% in the first quarter of 2008 to
less than 13% in the fourth quarter of 2008.407
COSIT’s unemployment estimates are based
on widely accepted measurement standards
that do not include discouraged workers.408 U.S.
Embassy-Baghdad, however, reports that COSIT
employment data may be too optimistic.409 The
Iraq Index, a Brookings Institution research
publication that uses multiple sources to produce
an estimate, places Iraqi unemployment in the
23%–38% range as of January 2009.410 This is a
2% decrease from its estimated range of 25%40% in 2008.411
Outstanding Debt
As of June 30, 2009, approximately $74 billion in
Iraqi debt had been forgiven, including $42 billion owed to Paris Club creditors.412 Iraq’s Paris
Club debt is to be repaid in 6-month installments over a 23-year period.413 The first principal payment will be made in July 2011.414 Iraq
continues to pursue forgiveness of its remaining
ECONOMY
debt, estimated to total between $50 billion and
$75 billion.415 Its major outstanding creditors are
Saudi Arabia, China, and Kuwait, to whom it
owes an estimated $32 billion to $56 billion.416
As part of their ongoing dialogue with other
countries, DoS officials continue to encourage
creditors that have not yet reached debt reduction
agreements with Iraq to look to Paris Club terms
as a model. Since January 2009, DoS has discussed
Iraq debt reduction with Saudi Arabia, China, Kuwait, Qatar, Jordan, Turkey, Egypt, and Poland.417
In June 2009, however, debt repayment
became a source of increased bilateral tension
with Kuwait as the UN Security Council took up
the issue of the Chapter VII provisions related
to Iraq. The GOI has asked that all Chapter VII
provisions be lifted. The government of Kuwait,
however, urged the UN not to lift the sanctions
until Iraq pays its debts, including reparations
owed from the 1990 Gulf War, and resolves
other outstanding issues related to the Security
Council resolutions.418 As of June 30, 2009, the
governments of Iraq and Kuwait had not yet
come to an agreement over these issues and were
still negotiating the issue.
While the Chapter VII provisions are in
place, Iraq is required by UN Resolution 1483,
as amended, to pay proceeds from the sale of
its petroleum into two internationally supervised funds:419
• 5% of Iraq’s oil proceeds goes to the UN Compensation Commission (UNCC), which makes
reparation payments to Kuwait and other
authorized claimants.
• 95% goes into the Development Fund for Iraq
(DFI), which is used for the benefit of the
Iraqi people. The DFI is currently supervised
by the International Advisory and Monitoring Board for Iraq (IAMB). The UN mandate
for IAMB is scheduled to expire December 31,
2009, after which an Iraqi-appointed oversight board (Committee of Financial Experts,
or COFE) is scheduled to assume oversight
responsibilities.420
In June 2009, the UN Security Council heard
the Secretary General’s report on the UN Assistance Mission for Iraq (UNAMI)—one of a
series of high-level reports on Iraq scheduled
to be heard by the Security Council this summer. The Secretary General’s report, mandated
by Resolution 1859, will examine relevant facts
related to Iraq and the UN Charter Chapter VII
provisions. It is being finalized and is expected to
be debated in the Security Council in August or
September of this year.421
Iraqi Budget
The decline in worldwide oil prices from the
record-high levels of 2008 has affected Iraq just
as it is assuming increasingly greater responsibility for funding its own reconstruction.
The GOI’s final 2009 budget, adopted in April,
projected expenditures of $58.6 billion and
revenues of $42.7 billion, based on a price of $50
per barrel of oil.422 During the second quarter
of 2009, however, the price of Kirkuk crude rose
to an average of $57.46 per barrel.423 As a result,
discussion among Iraqi lawmakers of a “negative
budget supplemental” that would acknowledge
a budget deficit has subsided.424 In fact, Iraq’s
cabinet has approved a supplemental budget,
based on revenues from potentially higher oil
exports and mobile phone fees, which would add
approximately $3 billion in expenditures to the
2009 budget. This measure, however, must be
reviewed and approved by the Council of Representatives (CoR) before it becomes law.425
JULY 30, 2009 I REPORT TO CONGRESS I
105
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Figure 2.44
Iraqi GDP, GOI Revenue, and GOI Budget
$ Billions
$100
$80
$60
$40
$20
$0
2005
GDP
2006
Oil Revenue
Operating Budget
Non-oil Revenue
Capital Budget
2007
2008
2009
Note: Numbers affected by rounding. IMF-estimated data for 2005−2006; IMF-projected data for 2007−2009. Non-oil revenue includes grants. Budget
excludes contingency funds.
Sources: IMF, “Country Report No. 08/303,” 9/2008, pp. 17, 19; IMF, “Country Report No. 08/383,” 12/2008, pp. 19, 21.
Iraq’s Ministry of Oil is counting on foreign
investment to ramp up oil production. But the
much-anticipated June 30 auction of service
contracts for six oil fields and two natural gas
fields in Iraq produced only one accepted bid.
This means that current levels of oil production are likely to prevail throughout the year.426
From January to June 2009, oil exports averaged 1.86 million barrels per day (MBPD),
which is below the GOI’s projected target level
of 2 MBPD.427 For more detailed information
on the oil and gas auction, see the Infrastructure section in this Report.
As noted previously by SIGIR, the largest
single portion of Iraq’s budget is devoted to operating expenses: 78% of the 2009 budget pays for
salaries, social benefits, pensions, goods and services, interest, assistance, grants, non-financial
assets, and other expenditures. Approximately
22% of the budget funds capital reconstruction
106 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
projects.428 Through April 2009, GOI ministries
had spent approximately $8.3 billion on operating costs and approximately $700 million on
capital projects.429
For an overview of the GOI’s revenue and
budget, relative to Iraq’s GDP, see Figure 2.44.
Closing Budget Gap
Several variables—such as the price of oil, the
amount of oil exports, and actual government
expenditures in 2009—will determine whether
the GOI has a deficit and the size of its deficit.
But absent significant budget cuts or dramatically rising oil prices or exports, the GOI is on
track to produce its first-ever, post-war budget
deficit in 2009, which the GOI estimates will be
approximately $16 billion.430 This deficit could be
covered by current unexpended fiscal balances
of approximately the same amount.431 Without
significant budget cuts, however, Iraq would
ECONOMY
need oil prices to continue to rise to about $80
per barrel to balance the 2010 budget.432 The
Ministry of Finance (MOF) responded to this
challenge with multiple rounds of spending cuts
to the initial draft of the 2009 budget. It also established a budget committee to propose caps on
2010 budget expenditures that are based on more
realistic economic scenarios.433
Iraq is also considering other mechanisms
to finance government expenditures, such as
the sale of treasury bonds to fund reconstruction projects.434 In addition, the GOI had preliminary discussions with the IMF on a potential
new Stand-By Arrangement for $5.5 billion.
Representatives of the GOI and IMF met in July
to discuss conditions, with a view to potentially
finalize a program by October 2009.435
The GOI is looking to generate additional revenues from development of its energy sector. The
Ministry of Oil proposed to assess $2.6 billion in
up-front signing fees, or “soft loans,” on foreign
companies that receive contracts to develop Iraqi
oil and gas fields. The GOI plans to invest these
funds in reconstruction projects.436 However,
as noted previously, the June oil and gas auction resulted in only one international company
being awarded a contract. The Cabinet’s spokesman had previously announced in May 2009
that a 35% tax on oil company profits had been
approved by the Cabinet and sent to the Parliament for approval.437
Strengthening Transparency
and Accountability
The U.S. government is assisting Iraq in developing the tools and expertise needed to implement a transparent, accountable, and sustainable budgeting system at both the national and
provincial levels. SIGIR has reported many times
on the challenges related to one of these tools, the
Iraq Financial Management Information System
(IFMIS). On June 3, 2009, USAID OIG released
an audit of the Economic Governance II (EG II)
program, of which IFMIS is a component. The audit concluded that the IFMIS project was behind
schedule and not fully operational. Among the
difficulties encountered in completing the EG II
program, the information technology (IT) leader
and four other colleagues were kidnapped in June
2007.438 On June 20, 2009, the British Foreign
Secretary confirmed that the remains of two of
the hostages had been recovered and that the
kidnapped project leader and two others were believed to still be in captivity and in grave danger.439
In the audit, USAID OIG noted that security
issues surrounding the EG II program limited the
agency’s ability to verify program fulfillment.440
As of June 30, 2009, 245 of the 250 spending
units in the GOI have been trained on IFMIS,
and 107 units are using the system as part of
their budgeting process. However, many obstacles impede implementation of the system:441
• The MOF has not provided IFMIS equipment
or connectivity to 80 GOI spending units
(32%), but it reports that procurement of these
items is currently in progress.
• The MOF has not yet assumed full responsibility for IFMIS or committed funding for service
and maintenance costs, including signing
a contract with the software company that
designs and maintains the system.
• The MOF has not yet confirmed that it is able
to provide appropriate housing and security
for the data backup server.
In addition, U.S. Embassy-Baghdad reports
that it cannot confirm the MOF’s commitment
to adopting and using the most crucial part of
JULY 30, 2009 I REPORT TO CONGRESS I
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
the system, the Budget Module.442 U.S. EmbassyBaghdad reports that the completion date for
IFMIS project activities is July 31, 2009, and the
estimated total cost is $32 million.443
Strengthening Key Sectors
of the Private Economy
Agriculture
Agriculture accounts for approximately 10% of
Iraq’s GDP and approximately 25% of employment. Yet Iraq continues to be a net importer
of food, a situation exacerbated by the recent
drought. Total rainfall in most of Iraq during
autumn 2008 and spring 2009 (the most recent
wheat-growing season) was only marginally
better than last year, which was well below
normal. Rainfall during this period averaged
45%–75% below normal for the most productive wheat-growing regions of Iraq.444
In addition, the flow of river water available
to Iraq for cultivation has been further reduced
by dams previously built on tributaries of the
Euphrates and Tigris rivers in Turkey, Syria, and
Iran.445 The GOI continues to negotiate with
neighboring countries, especially Turkey, to increase the flow of water from the Euphrates and
Tigris rivers into Iraq. For more information on
the status of the water supply, see the Infrastructure section of this Report.
As a result of acute water shortages, Iraq is
experiencing its second consecutive year of
reduced wheat harvests.446 In fact, the Ministry
of Agriculture reported in March 2009 that Iraq
is using only about 50% of its arable land because
of lack of irrigation and poor soil quality.447 The
provinces of Ninewa, Erbil, and Tameem, which
account for 35% of the nation’s wheat production, were particularly hard hit by a lack of
108 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
rainfall.448 The provinces of Diyala, Wassit, and
Qadissiya, producers of an additional 32% of the
nation’s wheat, were hurt by the drop in Tigris
and Euphrates water levels.449 The U.S. Department of Agriculture estimates that 2009–2010
wheat production in Iraq will be approximately
1.35 million tons—45% below normal.450 In addition, Iraq’s central and southern provinces are
expected to reduce rice planting by half in summer 2009 because of insufficient water.451
Drought conditions have also caused other
problems for Iraqi farmers. For example, an unprecedented number of poisonous snakes fleeing
the water-deprived marshes near Nassriya have
attacked cattle and buffalo, causing serious losses
to farmers in southern Iraq.452
In addition to the drought, other factors are
contributing to lower agricultural output in Iraq.
Cheaper imported vegetables are undercutting
prices for Iraqi produce, creating disincentives
for Iraqi vegetable farmers. In response, the
GOI announced a temporary ban on vegetable
A dry lake due to the drought, which runs 20 kilometers in southern Iraq through the provinces of
Thi-Qar, Missan, and Basrah. (GOI Photo)
ECONOMY
imports in June 2009, which could be lifted if
shortages ensue.453 The low prices set by the government for wheat and barley purchased for the
Public Distribution System, as well as the volume
of wheat imported for the program, have also
created disincentives for domestic cultivation.454
In a step to increase agricultural output, the
Chairman of Iraq’s National Investment Commission announced that 50-year lease contracts
on Iraqi farmland would be offered to foreign
investors from the Gulf region.455
The U.S. government supports the revitalization of Iraqi agriculture through a variety of
programs to upgrade irrigation techniques, boost
agricultural and dairy production, and train
Iraqis in modern animal husbandry techniques
and sanitary slaughtering practices. For example,
during May and June 2009, the Inma Agri-Business Program conducted these activities:456
• completed construction of a fruit and vegetable packing house outside Baghdad, demonstrating how modern food handling and
packing practices can increase shelf-life and
the revenue generated from crops
• signed three feedlot grants to demonstrate how
livestock can be raised more economically in
confinement
• imported 12,400 Hungarian fingerlings to
cross-breed with heat-resistant Iraqi carp to
increase aquaculture yields
• ordered 120,000 U.S.-grafted fruit saplings and
rooted grape vines for export to Iraq in 2010 to
help increase agricultural output
In another example, a newly constructed
U.S.-funded slaughterhouse in Qala Diza will
provide modern meat processing facilities for
the local population, who are primarily engaged
in trading, farming, and raising sheep and
calves. The Deputy Inspector General for Iraq
Reconstruction visited this facility in Sulaymaniyah province on June 19–22, 2009. 457
Foreign Investment in Iraq
President al-Maliki made several trips abroad
this quarter to publicize investment opportunities in Iraq. On April 30, 2009, he led an Iraqi
delegation to a London investment conference—
jointly sponsored by Iraq’s National Investment
Commission and the UK Department for International Development—to discuss oil and infrastructure opportunities in Iraq.458 The Prime
Minister also led a delegation to Paris on May 4,
2009, to discuss investment opportunities in Iraq
with French President Sarkozy and other French
senior officials.459 These are part of a series of
bilateral investment conferences, the importance
of which is indicated by the following upcoming
events in 2009:460
• October 20–21 Iraq Business Forum in Washington, D.C.
• November 3–4 investor conference in Beijing,
China
• November investment conference in Berlin,
Germany
• Fall investor conferences in Paris, France;
Seoul, Korea; Sweden; and Italy
Following up on the Prime Minister’s announcement in London that Iraq is working to
create a friendly environment for foreign investment, the Iraqi Council of Ministers approved a
bill in June 2009 legalizing foreign ownership of
Iraqi land for investment in housing construction projects.461 The legislation, which represents
a departure from previous Iraqi policy, is currently pending in the Council of Representatives.462 It represents an attempt to find workable
solutions for reforms that are politically difficult
to implement at this time.463 U.S. EmbassyJULY 30, 2009 I REPORT TO CONGRESS I
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IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
Baghdad, however, points out that major
obstacles to foreign investment in Iraq persist,
including bureaucratic inefficiencies, infighting
among political factions, and corruption.464
Despite the challenges, the GOI and the U.S.
government are working together to increase
the number of Iraqi-owned businesses that can
successfully compete for government contracts.
A key focus of this effort is to increase economic
opportunities for traditionally underserved
communities, especially women. Since FY 2005,
JCC-I/A reports that reconstruction and rebuilding contracts valued at more than $450 million
have been awarded to businesses in Iraq owned
by women. For a more detailed discussion, see
the Contracting section of this Report.465
Challenges to Modernizing
Key Iraqi Financial Institutions
A functioning, well-capitalized banking system
is key to sustaining economic growth. The U.S.
government, along with the IMF and the World
Bank, is working to strengthen the management
and capitalization of Iraq’s public- and privatesector banks, as well as to increase the access of
the GOI and Iraqi citizens to modern financial
products and services. But cultural and trust issues in Iraq remain obstacles to implementing a
modern banking system.466
The U.S. Department of the Treasury (Treasury) reports that although most Iraqis trust the
large state-owned banks, they remain suspicious
of privately owned banks. As of June 2009,
31 private banks had been licensed, and 22 of
them were actually operating. Privately owned
banks are small and highly risk-averse. Lending
110 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
is not their dominant line because of the unusual
risks inherent in Iraq’s economy.467
With the exception of perhaps 10 banks, most
private banks do not follow international standards or have modern credit departments. Even
if they are partially owned by foreign banks,
there is little transfer of knowledge and no
non-Iraqi senior management to drive reform.
Many of the chairmen of these private banks live
outside of Iraq, principally in Amman, Jordan.
With little incentive and no enabling legislation,
private banks are not likely to merge or acquire
each other..468
Al-Warka Bank is the largest private bank in
Iraq in terms of assets and the country’s fifth
largest bank. At the end of 2008, al-Warka had
assets of $1.3 billion and 85 branches, built
quickly in 2007 and 2008 through property
purchases and branch expansion. Without any
marketing effort and relying on its “reputation,”
al-Warka has expanded from 500 customers
in 2003 to 70,000 customers in 2009. However,
al-Warka reportedly is “locked out” of business
with public-sector entities (deposits and wage
and pension distribution) because it lacks political connections.469
USAID’s Tijara initiative is designed to address the many barriers to private lending in
Iraq. A key area of focus is improving lending
resources for small- and medium-size enterprises
(SMEs). In June 2009, a $6 million USAID grant
supported the start of operations for the Iraqi
Company for SME Finance Ltd. (ICF-SME).
Established by nine shareholder Iraqi banks,
the goal of the ICF-SME is to provide capital to
participating commercial banks, enabling them
to lend to qualified borrowers at below-market
rates. Tijara also supports the Iraq Company for
ECONOMY
Bank Guarantees (ICBG) initiative. Since 2006,
344 loans representing $7 million have been
disbursed under ICBG guarantee to SMEs.470
For a list of the top private banks in Iraq,
by number of branches and assets, please see
Table 2.20.
Table 2.20
Top Private Banks Ranked by Branch
Number and Total Assets
Bank
Branches
Al-Warka Bank
85
Investment Bank of Iraq
20
Economy Bank
20
Bank of Baghdad (25% UGB)
19
Iraqi Middle East Investment Bank
18
Dar As-Salaam Bank (75% HSBC)
14
Gulf Commercial Bank
14
Basrah International
13
Credit Bank of Iraq (75% NBK)
12
Mosul Bank
12
Total Assets
(USD Millions)
Al-Warka Bank
Iraqi Middle East Investment Bank
$1,285
$646
Bank of Baghdad (25% UGB)
$483
Al-Bilad Islamic Bank
$480
Dar As-Salaam Bank (75% HSBC)
$401
Basrah International
$363
North Bank
$303
Credit Bank of Iraq (75% NBK)
$290
Kurdistan Islamic Bank
$217
Gulf Commercial Bank
$206
Note: UGB = United Gulf Bank, Kuwait; NBK = National Bank
of Kuwait; HSBC = HSBC Group (London).
Source: U.S. Treasury, response to SIGIR data call, 7/2/2009.
Treasury has identified many constraints to
private-sector bank lending, including:471
• Loan decisions are delayed because of the poor
quality of loan applications and lack of credit
officer experience. When potential bank customers seek financing, they draw on savings or
relatives first and microfinance institutions last.
• The main source of bank revenue is not interest earned from loans: it is transaction fees for
electronic funds transfer and the processing of
state-owned enterprise transactions, such as
direct deposits and cash disbursements. Reliance on fee income is safer because credit risk
cannot be reliably assessed.
• There are no guidelines or manuals at the
branch level to assess credit risk and no uniform loan application process. Disclosure standards and audit requirements are not available.
• Opening a personal or commercial bank
account is a cumbersome and costly process
at the private banks. Many types of identifications, certifications, and approvals are required. The banks assess a 2% fee for making a
deposit. ATM usage is minimal, but the Smart
Card biometric debit card issued by stateowned banks seems to be gaining popularity.
Update on the Rafidain
and Rasheed Banks
The majority of all Iraqi banking assets are
held in the two largest publicly owned banks,
Rafidain and Rasheed.472 As reported earlier
by SIGIR, Rafidain and Rasheed are currently
undergoing major restructuring with support
from the U.S. Treasury and the World Bank.
Based on the audits of a private U.S. accounting
firm, an Action Plan (2008–2012) for the Iraqi
Banking Reform Strategy has been developed
with detailed plans to correct the operational
deficiencies of these two banks. International
JULY 30, 2009 I REPORT TO CONGRESS I
111
IRAQ RECONSTRUCTION FUNDING SOURCES AND USES
donors, along with senior level officials from the
Central Bank and the MOF, met the first week
of July 2009 in Cairo to coordinate activities and
draw on lessons learned from bank restructuring
efforts currently underway in Egypt. Conference
participants also included representatives from
the U.S. Treasury, Financial Services Volunteer
Corps, IMF, World Bank, and Egyptian Banking
Institute.473 The Action Plan is scheduled to be
implemented over the next three years.474
In the interim, Treasury reports slow but
steady progress on developing and implementing a core banking system for Rafidain Bank.
Rasheed Bank has made an initial recommendation for a core banking system, but the MOF has
112 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
not yet approved it. Progress is also being made
on documenting current operational processes
in both banks, but they have resisted a strategic planning exercise to define their goals and
franchises.475 In terms of financial restructuring,
two areas of particular contention involve the
difficulties associated with writing off external debts, and the absence of documentation
to reconcile accounts.476 The World Bank has
appointed a former consultant to Iraq’s Central
Bank to coordinate the operational restructuring of both banks.477 The Rafidain and Rasheed
banks have also recently issued approximately
362,000 Smart Cards for direct deposit of salaries
and pensions.478 ◆